Indian Swap Rates Near One-Month High as Cash Shortages Increase

India’s five-year interest-rate swaps traded near a one-month high on signs a cash squeeze in the banking system is worsening after companies paid quarterly taxes this month.

Local lenders borrowed an average 1.6 trillion rupees ($29 billion) a day from the central bank last week to meet shortages, compared with 909 billion rupees in the previous five days, official figures show. Indian companies were due to make tax payments by Dec. 15.

“Swaps are reflecting the liquidity squeeze in the banking system,” said Srinivasa Raghavan, executive vice president of treasury at Dhanlaxmi Bank Ltd. (DHLBK) in Mumbai.

The fixed payment to lock in five-year borrowing costs rose one basis point to 7.1850 percent in Mumbai, matching the level touched on Nov. 26, according to data compiled by Bloomberg.

The yield on the benchmark 8.15 percent government bonds due June 2022 fell one basis point to 8.13 percent.

To contact the reporter on this story: V. Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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