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Informist, Monday, Apr. 21, 2025

By Vidhushi RajPurohit

MUMBAI – Issuances of certificates of deposit remained muted Monday with only one issuance on account of slower credit off-take at the beginning of the financial year and ample liquidity in the banking system, dealers said. Expectations of further easing of borrowing rates in the upcoming months also kept most issuers on the sidelines.

"Market is now factoring in a 25-basis-point cut in policy rate at the June policy meet and, therefore, issuers are not willing to borrow at (current) higher rates," a dealer at a private bank said. "There is so much surplus with every one, that has also reduced borrowing needs."

Indian Bank was the sole issuer of CD Monday and it raised INR 10 billion through a three-month paper at 6.45%. "Indian Bank must have raised funds due to some funding requirements," a dealer at a brokerage firm said. "I think it is more so because of GST (goods and services tax) outflows."

Outflows for Goods and Services Tax payment amounted to around INR 1 trillion, dealers estimated.  The Reserve Bank of India net absorbed INR 1.01 trillion Sunday from the banking system –- a proxy for liquidity surplus –– down from INR 2.14 trillion Thursday, the previous working day. Financial markets were shut Friday on account of Good Friday. Consequently, banks reduced the funds parked at the RBI's Standing Deposit Facility Sunday to INR 1.06 trillion from INR 2.36 trillion Thursday to manage their liquidity needs through the long weekend.

Rates for three-month CD, the most liquid tenure, were flat at 6.45-6.50%. The rates were sharply higher than the three-month T-bill auctioned Wednesday which was at 5.9354%, the lowest since September 2022, and below the policy repo rate of 6.00%. Borrowing rates in the short-term debt market are also expected to fall before the next Reserve Bank of India's Monetary Policy meeting in June, as traders are widely expecting another 25 bps reduction in policy rates. Money market rates, being short-term, will be the first to react to any cut in the RBI repo rate.

Issuance of commercial papers also fell with only INR 8.75 billion raised by companies, down from INR 19.75 billion raised Thursday. Cholamandalam Finance was the largest issuer of CP as it raised INR 6 billion through a six-month paper at 7.17%. The other two issuers were Chennai Petroleum Corp. Ltd. and IGH Holdings Ltd., each of which raised INR 1.75 billion and INR 1 billion. Chennai Petroleum raised the funds through a paper maturing June at 6.42% and IGH Holdings Ltd. raised funds through a three-month paper at 7.07%.

"Issuances have been on the lower side only, I think it might pick in the next week," a dealer at a brokerage firm said. "This week there doesn't seem to be any pressure from the redemption point of view."

--Primary market

* Cholamandalam Finance, Chennai Petroleum Corp. Ltd. and IGH Holdings Ltd. raised funds through CPs.

* Indian Bank raised funds through CD. 

--Secondary market

* Bank of Baroda's CD maturing Friday was traded once at a weighted average yield of 6.2458%.

* Motilal Oswal Financial Services' CP maturing Tuesday was traded once at a weighted average yield of 6.6077%.

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 Deepshikha Bhardwaj

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