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Informist, Tuesday, Apr. 15, 2025

By Siddhi Chauhan

MUMBAI – Issuances in the commercial paper market rose Tuesday on the back of strong demand from mutual funds, while no bank tapped the certificates of deposit market to raise funds amid the liquidity surplus in the system. Fundraising through CPs more than doubled to INR 67.75 billion Tuesday from INR 27.25 billion Friday. Money markets were shut on Monday for Ambedkar Jayanti.

Reliance Jio Infocomm was the largest CP issuer, raising INR 34 billion through a three-month paper at 6.55%, while Hindustan Petroleum Corp. Ltd. raised INR 21 billion through a near three-month CP at 6.40%. "Issuances have started to pick up because of flows from mutual funds. They (mutual funds) generally start getting flows from the second week of every quarter," a dealer at a brokerage firm said. "Also, a lot of manufacturing companies are raising funds right now because of low rates in the two-month segment." 

The indicative rates on the three-month paper issued by manufacturing companies were unchanged from Friday at 6.55-6.75%, while those on the two-month paper were 6.35-6.55%, down from 6.41-6.61% Friday. The indicative rates on the three-month paper issued by non-banking financial companies were unchanged from Friday at 6.65-6.85%. 

Meanwhile, for the second consecutive day banks did not tap the short-term debt market due to low demand as liquidity improved, dealers said. According to the latest data from the Reserve Bank of India, the central bank's net liquidity absorbed from the banking system –- a proxy for the liquidity surplus –- was INR 1.65 trillion Monday.

Liquidity is expected to remain comfortable as the RBI is set to inject INR 2.30 trillion into the system with a long-term variable rate repo auction and three scheduled auctions of government bonds under its open market operations this month. This may further dampen demand from banks for borrowing via CDs, dealers said. 

"Banks are not willing to borrow funds in high amounts in April as it will weigh on their LCR (liquidity coverage ratio) limits," a dealer at a private bank said. "They (banks) have already borrowed highly in March so that has also reduced needs." So far in April, banks have raised only INR 89.75 billion through CDs, sharply lower from INR 2.26 trillion in March, according to data compiled by Informist. The lack of interest from banks resulted in short-term borrowing costs for CDs to fall by two basis points to 6.48-6.68% Tuesday. 

--Primary market

* Godrej Consumer Product, Tata Consumer Product, HPCL, Reliance Jio Infocomm, Godrej & Boyce, and HDFC Securities raised funds through CPs.

* No funds were raised through CDs. 

--Secondary market

* Bank of Baroda's CD maturing Thursday was traded thrice at a weighted average yield of 6.0545%.

* Bajaj Finance's CP maturing Wednesday was traded twice at a weighted average yield of 5.8658%.

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

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

Edited by Saji George Titus

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