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Informist, Tuesday, May 27, 2025

By Sachi Pandey

MUMBAI – Issuances in the short-term debt market fell on Tuesday as corporate and bank borrowers preferred to wait for clearer cues from the Reserve Bank of India's monetary policy meeting in June, dealers said. Dealers added that issuers expect policy rates to fall, and are holding on to their positions in anticipation of lower borrowing costs.

Fundraising through commercial papers dropped to INR 15.25 billion on Tuesday from INR 19.25 billion on Monday. Cholamandalam Investment and Finance Co. Ltd was the largest issuer of CP as it raised INR 6.50 billion through CPs maturing in 1 year at a rate of 7.17% and INR 3 billion through papers with maturity of six months at a rate of 7.06%. On Monday, Muthoot Finance and Motilal Oswal Financial Services had led the CP market, each raising INR 5 billion through three-month papers.

Activity in the certificate of deposit segment also slowed. Only Export-Import Bank of India tapped the market, raising INR 40 billion through one-year CDs at a rate of 6.50%. This marked a decline from INR 44 billion in CD issuances on Monday, which had seen stronger participation from banks. Among Monday's key issuers, Bank of Baroda raised INR 15 billion through three-month CDs at 6.15%, while Canara Bank raised INR 14 billion at the same rate and tenor.

"Issuers are waiting for better levels. Rollovers are not happening at the moment as the market expects rates to soften further after the RBI policy," a dealer at a large brokerage firm said. "But the underlying sentiment is still positive."

Rates on short-term debt instruments were mostly steady after falling 10 basis points on Monday. On Tuesday, rates on three-month CPs issued by non-banking finance companies were quoted at 6.50–6.70%, while those by manufacturing firms were at 6.45–6.65%. Rates on three-month CDs ranged between 6.12–6.32%.

Dealers also pointed to surplus liquidity in the banking system as a key reason for subdued demand. "Liquidity is ample. Most participants are not in urgent need of funds and are choosing to wait for better pricing after the policy meeting," another dealer said.

On Monday, the RBI had net absorbed INR 1.70 trillion, broadly unchanged from INR 1.71 trillion on Sunday, the central bank data showed. Banks parked INR 2.11 trillion with the RBI at the Standing Deposit Facility, up from INR 1.50 trillion Sunday.

--Primary market

* Indian Oil Corporation, Network18, Cholamandalam Investment and Finance Company raised funds through CPs.

* Export-Import Bank of India raised funds through CDs.

--Secondary market

* Canara Bank's CD maturing Wednesday was traded eight times at a weighted average yield of 5.8877%.

* Hindustan Petroleum Corp. Ltd's CP maturing Wednesday was traded three times at a weighted average yield of 5.8044%.

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 Deepshikha Bhardwaj

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