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Informist, Thursday, Mar. 13, 2025

By Siddhi Chauhan

MUMBAI – Borrowing through certificates of deposit and commercial paper fell sharply Thursday as issuers held off on raising funds ahead of the long weekend, dealers said. After rising to INR 138.00 billion on Wednesday, CP issuance fell to just INR 13.50 billion Thursday. Similar was the case with issuances via CDs, which fell to INR 60.00 billion from INR 156.25 billion Wednesday, dealers said. 

"Usually issuers aren't keen to raise funds ahead of a long weekend because they don't know what the liquidity condition will be on the next working day," a dealer at a broking firm said. "A drastic change in view can come if liquidity changes. This is why very few people would want to (raise) funds ahead of a long weekend." Indian financial markets are shut Friday for Holi.

Market participants expect the liquidity deficit to worsen going forward owing to outflows for corporate advance tax, which are expected to drain between INR 2.00 trillion and INR 2.60 trillion from the banking system till Monday, dealers said. The high outflows are not, however, a worry for market participants because of the liquidity operations announced by the Reserve Bank of India.

"I don't see a significant upside in CP/CD rates because there is a sentiment in the market that the RBI will provide support to the market," a dealer at a state-owned bank said. "They (the RBI) can also conduct long-term VRRs (variable rate repo operations) to provide transient liquidity." The central bank will conduct a four-day variable rate repo operation Monday for INR 1 trillion. 

In light of the upcoming outflows, the central bank has also announced an open market operation auction which will add INR 500 billion into the banking system Wednesday. The auction will take place Tuesday. The central bank had conducted an eight-day variable rate repo operation of INR 1.00 trillion during the day Thursday to provide transient liquidity amid heavy outflows, dealers said. However, participation in the auction was quite meagre. 

"In short order of three months RBI would have injected INR 2.4 trillion via OMOs and $20 billion via long-term FX swaps (dollar/rupee buy/sell swaps). This doesn't include the swaps and repo operations that are slated to mature in FY26 (Apr-Mar). With this level of liquidity injection, core and system liquidity are expected to end the fiscal firmly in positive territory and that will spill over into April," ICICI Securities Primary Dealership said in a note Thursday.

On Thursday, Punjab Natioonal Bank was the largest CD issuer, raising INR 25 billion through a three-month CD at 7.56%, followed by Bank of India, which raised INR 15 billion through three-month paper at 7.63%. On Wednesday, Bank of India was the largest CD issuer, raising INR 42.50 billion through one-month and three-month CDs at 7.65% and 7.63%, respectively.

Meanwhile in the CP segment, HDFC Securities was the largest issuer, raising INR 5.50 billion through three-month paper at 7.92%. On Wednesday, National Bank for Agriculture and Rural Development was the largest CP issuer, raising INR 25 billion through a three-month paper at 7.65%. 

Rates on three-month CDs were unchanged at 7.55-7.65% Thursday. Those on three-month CP of non-banking finance companies were also similar to the previous day at 7.82-8.03%. Rates on CP issued by manufacturing companies were at 7.65-7.85% Thursday.

--Primary market

* HDFC Bank, Bank of India, Bank of Baroda, Punjab National Bank, and Punjab and Sindh Bank raised funds via CDs.

* Reliance Jio Infocomm, HDFC Securities, Axis Securities, and Jio Financial Ltd. raised funds via CP.

--Secondary market

* Union Bank's CD maturing on Mar. 20 was traded five times at a weighted average yield of 6.8501%.

* Reliance Retail Ventures Ltd.'s CP maturing Monday was traded thrice at a weighted average yield of 7.0144%.

The following were the volumes, in INR billion, in the secondary market for short-term debt at 1700 IST, as detailed by the Clearing Corp. of India's F-TRAC platform:

End

Edited by Rajeev Pai

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