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Greater Efficiency and Transparency in Settlement Process

The Clearing Corporation of India, established at the initiative of the Reserve Bank of India, has made concerted efforts at providing institutional infrastructure to ensure orderly development and also broaden and deepen the money, government securities and foreign exchange markets. With a radical transformation in the settlement process in the securities and foreign exchange markets, the organisation has overseen the development of better risk management techniques and has also endeavoured to insulate the financial system from shocks emanating from operational issues.


Greater Efficiency and Transparency in Settlement Process













ll t









M tMonthly Averages (Jan 2001 to June 2007) i l (Daily Working Days July 2007)
Economic and Political WeeklyAugust 18, 20073354Table 8: Auctions of 91-Day Treasury Bills(Amount in Rupees Crore)Date ofNotifiedBids TenderedBids AcceptedSubscriptionCut-offCut-offAmount OutstandingAuctionAmountDevolvedPriceYieldon the Date of IssueNoFace ValueNoFace Valueon PDs(Rupees)Rate(Amount)(Amount)(Amount)(Per Cent)TotalWith RBIOutside RBI (1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)2006July 52000.00563516.21312000.000.0098.436.4024180.120.0024180.12[98.44][6.34]July 122000.00612886.00352000.000.0098.436.4024572.500.0024572.50(1)(500.00)(1)(500.00)[98.44][6.34]July 192000.00583909.05392000.000.0098.426.4426562.220.0026562.22(2)(750.00)(2)(750.00)[98.43][6.38]July 262000.00884250.7527805.750.0098.426.4428970.970.0028970.97(3)(2350.00)(3)(2350.00)[98.42][6.44]2007July 4500.001026246.0018500.000.0098.486.1970356.000.0070356.00(4)(7100.00)(4)(7100.00)[98.50][6.11]July 112000.001317253.00342000.000.0098.745.1270106.000.0070106.00(2)(250.00)(2)(250.00)[98.76][5.04]July 182000.001009177.47142000.000.0098.894.5070897.000.0070897.00(1)(500.00)(1)(500.00)[98.90][4.46]July 252000.00786468.08322000.000.0098.904.4670797.000.0070797.00(0)(0.00)(0)(0.00)[98.93][4.34]Figures in parentheses in cols 3 to 6 represent numbers and amounts of non-competitive bids which are not included in the total.Figures in the square brackets under cols 8 and 9 represent weighted average price and respective yield.Table 6: Comparison of Call, Overnight CBLO and Repo RatesWeek-EndingWeighted Average RatesDaily Average Volumes(in Per Cent)(Rs Crore)CallOvernight CBLORepoCallOvernight CBLORepo1-Jun-073.462.072.8687242411388898-Jun-070.400.020.21619012591673315-Jun-073.150.380.8513420293231390922-Jun-071.420.070.397570206871136429-Jun-075.364.634.56118342283994446-Jul-070.920.170.409204180561184413-Jul-070.900.060.2612080265291193720-Jul-070.330.040.229893192491103027-Jul- Clearing Corporation of India (CCIL).Table 7: Details of Central Government Market Borrowing(Amount in Rs Crore)Date ofNomenclatureType ofNotifiedCompetitive BidsCompetitive BidsIndicative YTM at Cut-offDevolvement onAuctionof LoanAuctionAmountReceivedAcceptedPrice (in Per Cent)Primary Dealers NumberAmountNumberAmount(Rs Crore)6-Jul-077.99 per cent 2017Normal60003081808810159797.99 per centNA6-Jul-078.33 per cent 2036Normal4000215827113439858.45 per cent (Rs 98.72)NA20-Jul-077.27 per cent 2013Normal60002271397311459847.59 per cent (Rs 98.47)NA20-Jul-077.95 cent 2032Normal3000235112854029918.34 per cent (Rs 95.82)NA18-Jul-076.65 per cent 2009MSS5000204209342449957.08 per cent (Rs 99.30)NA25-Jul-077.55 per cent 2010MSS200010855052619997.04 per cent (Rs 101.27)NASource:RBI Press Releases.It is a screen-based negotiated quote drivensystem for all dealings in the call/noticeand term money market. Though the dealingon this platform is optional, 84 banks andseven primary dealers have taken member-ship of NDS-call and now it accounts forabout 75 per cent of the total trades.Finally, it is in the foreign exchangemarket that CCIL has undertaken the onusof guaranteeing settlement which has ledto a reduction in counter party exposure,operational costs, and improved efficiencyand liquidity. It also offers other benefitssuch as easing the process ofreconciliationof Nostro accounts balances by banks,reduction in size of credit and liquidityexposure of participants and hence sys-temic risk. Thus, CCIL has been instru-mental in improvising the operations of thegovernment securities and forex markets.IIMoney, Gilt-Edged andForex MarketsIn July, notwithstanding any policypointers, there was a significant easing ofyield rates on dated securities and treasurybills across maturities due to the presenceof huge unabsorbed liquidity remaining inthe system on account of a cap on LAFreverse repo absorptions. Even the callrates continued to rule at abysmally lowlevels despite huge outflows towardscentral and state auctions. Apart from thisregulatory restriction, increased govern-ment expenditure, lower absorptionsunderMSS and more importantly, RBI’s sterilis-ation activities resulted in a surfeit ofliquidity as reflected in sizeable reverserepo bids being tendered throughout themonth. Even the mopping up through MSSwas done only in the last two weeks of themonth; consequently, the market partici-pants remained apprehensive of possiblemeasures by the RBI in its impendingreview of credit policy. Further, as thefinance minister asserted the need for atighter monetary policy, the sentimentsturned cautious. In the first quarter reviewof monetary policy, the RBI surprised themarket by hiking the cash reserve ratio(CRR) by 50 basis points with effect fromAugust 4 while holding all the benchmarkrates steady. Further, as per market expec-tations, the cap on absorption under
Economic and Political WeeklyAugust 18, 20073355Table 10: Auctions of 364-Day Treasury Bills(Amount in Rupees Crore)Date ofNotified Bids TenderedBids AcceptedSubscriptionCut-offCut-offAmountAuctionAmountDevolvedPriceYieldOutstandingNoFace ValueNoFace Valueon PDs(Rupees)Rateon the Date(Amount)(Amount)(Amount)(Per Cent)of Issue2006July 52000.001106285.00272000.000.0093.437.0543268[93.45][7.01]July 192000.001036195.00202000.000.0093.467.0243518[93.47][6.99]2007July 41000.00936255.00201000.000.0093.337.1755325(0)(0.00)[93.41][7.07]July 182000.00937415.49222000.000.0093.846.5855627(3)(583.43)(3)(583.43)[93.92][6.49]Figures in the square brackets represent weighted average price and the respective yield.Figures in brackets represent numbers and amounts of non-competitive bids which are not included in the total.Table 9: Auctions of 182-Day Treasury Bills(Amount in Rupees Crore)Date ofNotified Bids TenderedBids AcceptedSubscriptionCut-offCut-offAmountAuctionAmountDevolvedPriceYieldOutstandingNoFace ValueNoFace Valueon PDs(Rupees)Rateon the Date(Amount)(Amount)(Amount)(Per Cent)of Issue2006July 121500.00401295.0016525.000.0096.756.7411606.56[96.77][6.68]July 261500.00643344.57301500.000.0096.746.7613106.56[96.75][6.72]2007July 111500.00784005.67301500.000.0097.076.0523301.00(0)(0.00)[97.10][5.99]July 251500.00684085.00121500.000.0097.185.8225141.00(3)(900.00)(3)(900.00)[97.19][5.80]Figures in the square brackets represent weighted average price and the respective yield. Figures in bracketsrepresent numbers and amounts of non-competitive bids which are not included in the total.Table 11: Profile of Major Commercial Bond Issues during July 2007SrIssuing Company/RatingNature ofCoupon in Per Cent Per AnnumAmount inNoInstrumentand TenorRs CroreFIs/Banks1Bank of IndiaPerpetual Bond10.55 per cent with a step-up ofAA+ & AA by Crisil & Icra50 bps if call is not exercised at theend of 10 years.4002Bank of MaharashtraPerpetual Bond10.65 per cent with call option at theAA & AA by Crisil & Careend of 10 years.2253Bank of MaharashtraUpper Tier IIAA & AA-by Crisil & CareBonds10.35 per cent for 15 years2004State Bank of PatialaNCD10.24 per cent for 15 years with aAAA by Crisil & Carestep-up of 50 basis points if call is notexercised at the end of 10 years2005NABARDNCD8.40-8.60 per cent for 3 years200AAA by Crisil & Care6Vijaya BankBonds9.50 per cent for 10 years.200AA+ Fitch & Care7Punjab National BankPerpetual Bond10.40 per cent with a step-up ofAAA by Crisil & Care50 basis points if call not excercisedat the end of 10 years500Central PSU1Indian Oil CorpBonds7.75-8.40 per cent for 14-18 years2853Total5401Total for July-06 (a year ago): Rs 6,067 crore. Total for June-07 (a month ago): Rs 3,990 crore.Notes:The amount shown in brackets above denotes the greenshoe option of the issue. *Total includes 10 more issues for less than Rs 200 crore ( 4 bank’s issues, 5 NBFC and 1 stateundertaking).Source:Various media sources.reverserepo of Rs 3,000 crore was re-moved and the second LAF has also beenwithdrawn with effect from August 6. Con-sequently, the bond prices fell on appre-hensions of pressure on liquidity. Despitethe easing of inflation, upward pressurespersisted due to increased internationalcrude oil prices. In the forex market,therupee continued to appreciate buoyed bythe huge inflow of foreign currency assetsand weaknesses in the US dollar.Inthecorporate bond market, FIMMDA istosetup a reporting portal for corporate bondissues incorporating the trades reported onboth the stock exchanges.Call Money MarketThe weighted averages of call ratesdipped sharply to 0.59 per cent in July from2.48 per cent in June and 6.59 per cent inMay given the huge surfeit of liquidity dueto increased government spendings andcap on absorptions under the LAF reverserepo (Table 5). In July, the overnight rateruled below 1 per cent barring a few daysin the beginning of the month (Table 4).Ahead of the first reporting Friday, thecall rates eased from 1.64 per cent on July3to 0.42 per cent on July 5 and then dippedfurther to 0.27 per cent on the first report-ing Friday, July 6. Due to auction of datedsecurities, the overnight rate jumped to apeak of 3.33 per cent on July 7 and thenruled at 2.01 per cent on July 9. Thereafter,the overnight call rates ruled below 1 percent for the rest of the month. Until July 19,the call rates ruled in a range of 0.27 percentand 0.72 per cent. On the second reportingFriday, July 20, the overnight rate dippedto0.21 per cent as banks had already coveredtheir positions. Following the outflowstowards MSS and dated securities auc-tions, the rate firmed up to 0.51 per centon July 21. Thereafter, the call rate easedcontinuously to touch a low of 0.16 percent on July 30 which rose marginally to0.17 per cent on July 31 (Graph A).In sync with call rates, the market repo(outside the LAF) and CBLO ratesdeclinedand continued to remain belowthe call rate. Overnight rates in the call,market repo and CBLO segments havedisplayed close co-movements (Table 6).Forex MarketA huge inflow of foreign currency assetsand dollar weaknesses against most of thecurrencies exerted immense pressure onthe rupee to appreciate sharply to touchnine-year high against the dollar in Julysupported by somewhat subdued RBI inter-vention. These pressures were so strongthat the market remained impervious of therise in international crude oil prices. Theforeign currency inflows in July have beenthe highest in the current financial year at$ 11,982 million on top of $ 5,112 millionin June. Even the FII inflows of $ 5.9billion in July alone of the total inflow of$ 10.2 billion in the calendar year till Julywere robust. With the deepening of lossesin the US subprime mortgages, the USdollar weakened against major currencies.Further, as the interest rates firmed up inthe Euro zone, the interest ratedifferentials
7 7.5 8 8.5 9 4th Week 1.0 2.0 3.0









0.0 -0.5 -1.0 -1.5

iWeighted Averages of -
Call Rates (Right Axis)

3 4 5 6 7 8 9 10111213141516171819212223

Economic and Political WeeklyAugust 18, 20073357Appendix Table: Secondary Market Operations in Government Papers: NDS and NDS-OM Deals(Amount in Rupees Crore)DescriptionsWeek-ending July 2007: Yield to Maturity on Actual TradingTotal for the Month2720136of July 2007AMTYTMCYAMTYTMCYAMTYTMCYAMTYTMCYAMTYTMCY1Treasury BillsA91-Day Bills1631.543.193259.263.583535.233.972293.935.7210719.964.11B182-Day Bills450.714.64203.284.50206.234.81750.886.401611.105.46C364-Day Bills2552.724.982572.905.292644.335.283379.626.8711149.575.702GOI Dated SecuritiesARegular (Per Cent: Year)6.75,2007---155.896.73------15.005.896.7311.50,2007---------306.2711.3630.006.2711.369.50,2008------106.959.3614.577.229.3724.577.119.3711.40,20080.66.9810.9056.86.6010.85------57.406.6010.8511.50,2008---106.611.061606.9611.0946.537.2211.10216.537.0011.0912.00,20080.557.2511.61---1756.9411.55107.0811.56185.556.9511.5512.25,2008------156.9511.58157.2811.6130.007.1211.606.65,20095949.456.986.699382.77.126.703735.57.266.7264957.486.7425562.657.206.716.96,2009 OMC SB------807.657.04---80.007.657.047.07,2009 OMC SB---557.707.1457.67.131087.1870.007.737.147.33,2009 OIL MKT BONDS---207.767.38507.667.371507.817.39220.007.777.387.33,2009 OMC SB---807.757.38507.667.371507.827.39280.007.777.3811.99,2009107.111.13257.1911.14507.3611.17---85.007.2811.166.00,2010 UTI SB---------108.26.3110.008.206.316.20,2010 UTI SB---------208.26.5020.008.206.507.55,20107307.0237.4537007.187.48686.567.307.50960.257.467.533076.817.267.5011.30,20100.157.410.24---12167.2710.19107.5510.271226.157.2710.1911.50,20101057.2010.36507.1510.34---2007.8310.51355.007.5510.4412.25,2010---157.310.85---157.5510.9030.007.4310.8812.29,201057.211.02---57.4411.073407.7811.14350.007.7711.149.39,20111295.437.318.78890.37.398.806607.598.856907.678.873535.737.458.8112.32,2011507.3610.71107.3210.69807.5910.76---140.007.4910.746.85,2012---547.657.07107.667.07---64.007.657.077.27,2012---------257.947.5125.007.947.517.40,20125867.377.39503.197.417.401817.567.45201.57.637.471471.697.447.417.47,2012 OIL MKT BONDS1008.097.65---------,201230.67.578.730.37.738.79---0.357.968.8731.257.588.7410.25,2012------7.57.669.2917.879.368.507.689.307.27,20132485.57.517.35803.747.587.38307.097.817.45268.007.543622.337.557.379.81,2013757.648.91---,20144907.627.47909.67.677.49372.497.877.571337.17.997.623109.197.837.5511.83,2014107.719.65---15.277.979.77---25.277.879.727.38,20159307.677.512691.127.757.552239.747.897.614058.858.027.679919.717.897.617.55,2015------257.377.52---25.007.377.527.59,2015 OMC SB---108.317.9158.337.92108.377.9425.008.347.929.85,20151007.868.81------58.148.94105.007.878.8110.47,201557.869.13---57.979.18---10.007.929.167.59,2016860.157.757.6711157.827.70560.597.917.7411558.017.803690.747.887.7310.71,201612.587.849.09---------12.587.849.097.46,20170.117.87.6416.477.877.68------16.587.877.687.49,201713912.067.767.6322770.747.837.6717266.57.917.7128488.028.057.7782437.327.917.717.99,20172942.957.787.885816.037.827.906633.37.887.93---15392.287.847.918.07,2017256.427.797.921896.447.847.951368.337.927.9922878.058.065808.197.948.006.25,201854.847.987.1140.187.977.101.798.,2018---25.457.918.845.98.098.95---31.357.948.865.64,20193.228.106.8926.188.086.882.288.357.03---31.688.106.896.05,20190.527.997.095.728.047.128.598.,202030.28.107.35------58.247.4435.208.127.367.94,2021159.57.937.936027.987.971958.068.025458.138.061501.508.048.018.13,2021 OMC SB30.58.388.30254.768.528.40610.028.558.477.58.558.42902.788.548.4410.25,2021---16.438.108.719.578.168.7558.238.8031.008.148.738.15,2022 FCI SB---------11.258.688.5311.258.688.538.35,202265.518.008.11206.28.048.1326.468.108.183038.178.22601.,20231.58.217.520.58.307.581.088.247.5421.288.367.6324.368.347.626.30,202358.227.57---108.167.5322.58.267.6037.508.237.588.01,20231008.558.41---------100.008.558.418.01,2023 OMC SB0.068.398.295028.648.48------502.068.648.488.03,2024 FCI SB258.428.330.248.428.3222.388.458.35172.668.738.56220.288.678.518.20,202450.48.568.47---------50.408.568.478.20,2024 OMC SB352.628.528.43762.628.658.543058.658.54---1420.248.628.518.40,202610.418.418.41---0.718.588.54---11.128.428.428.40,2026 OMC SB92.878.478.46841.468.688.632.058.588.555.728.618.57942.108.668.618.23,2027 FCI SB208.458.40---,2027------1258.258.25---,202814.58.257.711.28.357.7928.347.787.858.457.8725.558.327.776.13,20280.558.387.865.058.447.9118.487.953.38.467.939.908.457.927.95,20321099.458.288.2475.758.338.280.58.438.370.58.58.431176.,20343.,20363006.18.268.277757.328.338.335884.798.368.355262.138.428.4221910.348.358.35 Sub-total36073.407.657.6259027.047.797.6843235.777.887.8953156.187.997.77191492.397.847.74BRBI’s OMO:Sales25.00--1.00--101.00--563--690.00--Purchase10.00-----5.00--10--25.00--Sub-total35.00--1.00--106.00--573.00--715.00--(A+B)36108.407.657.6259028.047.797.6843341.777.887.8953729.187.997.77192207.397.847.743Market Repo58229.0668515.3274699.3864111.46265555.224State Govt Securities296.387.838.59408.878.008.55242.478.178.46107.468.318.231055.188.028.51Grand total (1 to 4)99268.81133987.67124669.41124372.53482298.42(-) means no tradingYTM = Yield to maturity in percentage per annumCY = Current yield in per cent per annumSGL = (RBI’s) Subsidiary General LedgerOMO = Open Market OperationsOMCSB= Oil marketing companies special bondsNDS = Negotiated Dealing SystemOM = Order Matching Segment.Notes:(1) Yields are weighted yields, weighted by the amounts of each transaction. (2) Current yield has not been worked out for treasury bills. (3) For Floating Rate Bonds (FRB’s) current yieldsare based on the latest half-year yield determined in the auction.

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