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Informist, Tuesday, Jul. 7, 2026

 

By Nandini Sinha

 

MUMBAI – Borrowings through short-term debt instruments rose to at least a seven-year high in June due to a sharp fall in yields, sustained credit growth, and banks' cash requirements at quarter-end, market participants said. The surge in commercial paper issuance was largely driven by public-sector companies shifting their borrowing from corporate bonds to commercial paper as borrowing costs in the short-term debt market remained low, they said.

 

Banks raised INR 1.80 trillion in June through certificates of deposit, up nearly 62% on-month and 38% on-year, according to data from Clearing Corp. of India Ltd. collated by Informist. CP issuances in June were INR 2.55 trillion, up nearly 85% on-month and over 60% on-year, according to the data.

 

"(Banks') credit growth is consistently rising. Till May, the cost of borrowing through domestic bonds was very high," Venkatakrishnan Srinivasan, managing partner at Rockfort Fincap, said. "So everybody has shifted (to the short-term debt market)."

In June, the Reserve Bank of India and the government announced a slew of measures to attract foreign capital flows into Indian government bonds and to support the rupee. Moreover, the interim peace agreement between the US and Iran pulled down Brent crude oil prices to around $71 per barrel in June, nearly the level before the war broke out in West Asia. Tracking these developments, yields on debt instruments plunged in June.

 

As of Jun. 30, yields on three-month, six-month and one-year AAA-rated CDs fell by 80 basis points from the end of May. Yields on three-month AAA-rated CDs fell to 6.40-6.45% at the end of June, while those on six-month and one-year CDs fell to 6.70-6.75% and 6.95-7.00%, respectively.

 

Yields on three-month AAA-rated CPs issued by non-banking finance companies fell by 110 bps from the previous month to 6.80-6.85% at the end of June. Yields on six-month CPs fell 85 bps during the same period to 7.15-7.20%, while those on one-year fell by 65 bps to 7.45-7.50% as of Jun. 30.

 

SECTOR-WISE FUNDRAISING

After falling sequentially in April and May, CP issuances rose to an almost seven-year high of INR 2.55 trillion in June. Fundraising by public sector undertakings through commercial papers rose in June as high corporate bond yields made the short-term debt instrument more attractive to state-owned entities, market participants said.

 

Public sector undertakings such as Small Industries Development Bank of India, National Bank for Agriculture and Rural Development, and NTPC raised nearly INR 681 billion through CPs in June, nearly three times as much as in May. Fundraising by state-owned entities through corporate bonds was INR 298 billion in June.

 

CP issuances in the 'others' category, which includes asset management companies, real estate companies and power companies, rose more than sixfold on month to INR 809 billion in June. However, issuances by non-banking finance companies declined 7% on month to INR 398 billion, while by manufacturing companies fell 60% on month to INR 115 billion.

 

On the CD front, of the INR 1.80 trillion issued in June, state-owned banks raised a total of INR 1.06 trillion, up nearly 71% on month. Bank of Baroda was the largest issuer of certificates of deposit for the second month in a row at INR 241 billion, followed by Union Bank of India with INR 212 billion.

 

Private sector banks raised nearly INR 703 billion through CDs, with HDFC Bank remaining the largest borrower at nearly INR 262 billion. Axis Bank raised nearly INR 164 billion. Small Finance banks raised INR 15.8 billion, while foreign banks raised INR 27.5 billion.

 

In the June quarter, fundraising through CPs grew over 20% on year to INR 5.38 trillion, while CDs rose nearly 46% on year to INR 3.37 trillion.

 

ROAD AHEAD

With credit growth at almost 18% on-year as of Jun. 15 and the credit-deposit ratio at an all-time high of 83.38%, market participants expect CD issuances to be robust going forward, dealers said. Although inflows into foreign-currency non-resident bank deposits are expected to push CD yields down in the coming days, market participants expect issuance to remain high due to strong credit growth.  

 

The RBI has introduced a concessional swap facility to cover the full hedging costs for banks raising fresh three- to five-year FCNR(B) deposits till Sept. 30. It is expected to attract inflows of about $43 billion, according to an Informist Poll. Rates on a three-month CD should range between 5.80% and 6.20% in July, a dealer at a state-owned bank said.

 

Market participants also expect oil marketing companies to continue fundraising through CPs in July despite fuel price hikes, as these companies are front-loading fundraising at current rates, the dealer at the bank said. Of INR 681 billion raised by public sector undertakings in June through CPs, oil marketing companies raised INR 151 billion, up 97% on month. 

 

The RBI's concessional dollar-rupee swap facility for overseas borrowings by public sector undertakings is mainly to help oil marketing companies, Srinivasan said. Minister of Petroleum and Natural Gas Hardeep Singh Puri said state-owned oil marketing companies incurred losses of INR 748 billion in the June quarter, with their under-recoveries at INR 1.88 trillion.

 

While the cost of the high crude oil prices has been passed on to consumers through the price hikes, oil marketing companies continue to incur losses of around INR 6 billion a day, Srinivasan said. "... over the period, the overall fundraising by oil companies can come down. But of course, whatever borrowing they've done till date, they have to refinance... they have to recoup their losses. So till that time, they'll continue to borrow," Srinivasan said.

 

The following are details of CD and CP issuances in June, as per data from the Clearing Corp. of India, in INR billion:

 

CD	Jun-26	May-26	On-month %	Jun-25	On-year %
State-owned banks	1,055.4	618.15	71	846.6	25
Private banks	702.85	479.90	46	441.1	59
Others	15.8	10.4	52	20	(-)21
Foreign Banks	27.5	5	450	1	2,650
TOTAL	1,801.55	1,113.45	62	1,308.7	38

 

 

CP	Jun-26	May-26	On-month %	Jun-25	On-year %
Non-banking finance companies	397.96	427.39	-(7)	893.65	(-)55
Manufacturing	114.82	279.4	(-)59	627.89	(-)82
Brokerages	546.22	328.16	66	N.A.	N.A.
Public sector undertakings	680.65	216.4	215	N.A.	N.A.
Others*	809.4	127.85	533	69.9	1058
Total	2,549.05	1,379.2	85	1,591.44	60

 

*Others category for FY27 saw inclusion of additional sub-categories from FY26.

 

End

 

US$1 = INR 94.97

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Saji George Titus

 

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