More Stories

Informist, Tuesday, Apr. 8, 2025

 

By Vidhushi RajPurohit and Siddhi Chauhan

 

MUMBAI – Issuance of certificates of deposit by banks soared to a record-high of over INR 2 trillion in March, driven by quarter- and year-end funding requirements coupled with tight liquidity in the banking system, dealers said. This is the first time since 2020-21 (Apr-Mar) that the borrowed quantum has surpassed INR 2 trillion, data compiled by Informist showed.

 

The borrowing needs of banks were also exacerbated by the increased refinancing needs as traders flocked to the short-term debt market to roll over their maturing papers. It is a cyclical trend observed during the year-end, as borrowing through CDs picks up as banks seek to disburse additional loans to bump up credit growth.

 

"It is the same story every month. The last quarter requires additional funding by banks as their outflows exceed the inflows, this month the liquidity was a major concern for banks and, therefore, it is natural for them to go to the avenue which is available and meet their demand," a dealer at a state-owned bank said. "On top of increased funding needs, the amount to rollover was also at a much higher level."

Issuances in March were INR 2.26 trillion, up 78% on year and up 89% sequentially. State-owned banks accounted for 58.8% of the total issuance and raised INR 1.33 trillion. Market players attributed the high issuances by state-owned banks to maturity of INR 1.10 trillion of CD issued by banks, which was rolled over.

 

Punjab National Bank was the largest CD issuer in March and borrowed INR 352.90 billion, almost double the amount of CD due for redemption, which was INR 235.75 billion. The state-owned lender was closely followed by HDFC Bank, which raised INR 314.65 billion worth of CD. Among private banks, the other big issuer was IndusInd Bank, which raised INR 165.50 billion, despite having no CD due for maturity in March. IndusInd Bank was in the headlines last month after it reported discrepancies in its derivatives portfolio that was projected to have an adverse impact of around 2.35%, or about INR 15 billion, on the bank's net worth as at December end.

 

According to market participants, tight liquidity drove banks to the short-term debt market. Systemic liquidity was in deficit for nearly the whole of March, which saw massive tax outflows in the form of advance tax and goods and services tax payments. The tax payments drained around INR 3.75 trillion from the banking system. The net liquidity injected figure--a proxy for systemic liquidity--on average, showed a deficit of INR 1.24 trillion in March.

 

"Individual banks have their own funding needs and in the overall (banking) system it took time for the liquidity to reach a neutral level. Mostly all banks rushed to the market in the first few weeks to borrow funds because in March the rates are expected to remain elevated for the entirety of the month," Himanshu Pathak, senior manager at the treasury desk with Federal Bank, said.

 

COMMERCIAL PAPERS

Fundraising through commercial papers rose to INR 1.85 trillion in March, the highest in 39 months on the back of high redemption due in March and tight liquidity. Meanwhile, sequentially a rise of around 35% was seen with a major chunk of the borrowing being driven by non-banking financial companies.

 

Funds raised by non-banking financial companies rose 70% on month to INR 1.19 trillion in March, while those raised by manufacturing companies rose 1.8% on month to INR 535.44 billion. The National Bank for Agriculture and Rural Development was the biggest non-banking financial company and raised INR 292.00 billion through CPs, followed by ICICI Securities which raised INR 112.05 billion. In March CPs worth INR 2.08 trillion matured of which INR 1.18 trillion redemptions were for non-banking financial companies alone, as per data compiled by Informist. However, issuances by housing finance companies and other categories that include real estate investment trusts and infrastructure investment trusts fell by 4% and 82.5% on month, respectively.

 

"The issuances from some companies was much lower than redemption due in the month because of high yields. If you see in first half of month, the spread between repo rate and CP rates was almost around 100 bps," a dealer at a brokerage fund said. "But it was only after Mar. 22 that the rates started to fall." Despite a maturity of INR 11 billion in March, Can Fin Homes Ltd. did not tap the short-term debt market. Similarly, Indian Railways Finance Corp. Ltd. did not tap the debt market even though CPs worth INR 20.25 billion were set to mature in March.

 

CP rates cooled in the last few days of March on expectations of a rate cut by the Reserve Bank of India's Monetary Policy Committee in April, market players said. The rate-setting will announce its decision on Wednesday. The rates on three-month CPs issued by non-banking financial companies fell 15 bps to 7.75-7.95% on Mar. 28. Rates on CPs of similar maturity issued by manufacturing companies fell 5 bps to 7.55-7.75% on Mar. 28.

 

Following are details of CPs and CDs issued in March, as per data sourced from the Clearing Corp. of India and compiled by Informist. Amounts in INR billion:

 

CP	March 2025	February 2025	on-month%	March 2024	on-yr%
Housing Finance	124.50	130.00	(-)4.23	134.07	(-)7.14
Non-banking finance companies	1,186.84	697.87	70.07	1,029.34	15.30
Manufacturing	535.44	525.77	1.84	345.79	54.85
REIT	3	17.10	(-)82.46	1.00	200.00
Total	1,849.78	1,370.74	34.95	1,509.20	22.57

 

CD	March 2025	Febraury 2025	on-month%	February 2024	on-yr %
State-owned banks	1,327.05	500.65	165.07	780.10	70.11
Priavte banks	596.65	443.65	34.49	430.15	38.71
Others	332.45	251.6	32.13	58.80	465.39
Foreign banks	2.75	1.00	175.00	-	-
Total	2,258.90	1,196.90	88.73	1,269.05	78.00

 

End

 

Edited by Ashish Shirke

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2025. All rights reserved.