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Informist, Monday, Jun. 9, 2025

By Siddhi Chauhan

MUMBAI – Borrowing through commercial papers plunged Monday as investors stayed on the sidelines due to unattractive levels, dealers said. High issuances on Friday also limited investors' appetite, they said. On Monday, CPs worth INR 16.75 billion were raised, sharply down from INR 181.50 billion raised Friday. No certificates of deposit were raised Monday against INR 50 billion raised Friday.

"We got offers from Indian Oil Corp. Ltd and other companies today (Monday) but we did not buy anything because they were quoting lower levels," a dealer at a public-sector bank said. "We were instructed not to buy anything today until the market stabilises."

Unable to come to an agreement, issuers who were quoting levels higher than the market also faced problems in raising funds, dealers said. "HDB Finance, which quoted 6.20%, a fine level for September paper (3 months), also couldn't raise funds," a dealer at a brokerage fund said. "Across markets we have seen yields have risen today even with the RBI (Reserve Bank of India) announcing 50 bps (basis points) rate cut and 100 bps CRR (cash reserve ratio) cut. The positive news has been neutralised by stance change to neutral. Though the rise in rates in the short-term market is limited because of CRR cut."  

On Friday, the RBI's Monetary Policy Committee delivered a larger-than-expected 50-bps policy repo rate cut to 5.50%, while most traders were expecting a cut of 25 bps. The RBI announced a 100 bps cut in CRR to 3% of banks' net demand and time liabilities starting September. The CRR cut is expected to infuse liquidity to the tune of INR 2.5 trillion into the banking system. However, along with a rate cut, the MPC also unexpectedly changed its policy stance to 'neutral', which led traders to expect the terminal repo rate to remain at 5.50%, they said. 

On Monday, Tata Steel was the largest CP issuer, raising INR 10 billion through a three-month paper at 5.95%. Investors' appetite was also dampened as they had invested a large chunk on Friday, dealers said. On Friday, Small Industries Development Bank of India was the largest CP issuer, raising INR 30 billion through a three-month paper at 6.75%, followed by Reliance Jio Infocomm and Reliance Retail Ventures raising INR 25 billion each through three-month papers at 5.80% and 5.90% respectively.

Little hopes of a rate cut in this calendar year resulted in short-term debt borrowing costs to rise 15 bps Monday. Indicative rates on the three-month paper issued by non-banking financial companies rose by 15 bps to 6.10-6.30%, while those of similar maturity raised by manufacturing companies were up at 5.83-6.03% from 5.78-5.98% Friday. Indicative rates on the three-month CD issued by banks were unchanged from Friday at 5.75-5.95% Monday. 

--Primary market

* Indian Oil Corp., Tata Steel, Pilani Investment and Birla Group Holdings raised funds through CPs.

* No funds were raised through CDs.

--Secondary market

* RBL Bank's CD maturing Tuesday was traded twice at a weighted average yield of 5.4393%.

* National Bank for Agriculture and Rural Development's CP maturing Tuesday was traded five times at a weighted average yield of 5.3310%.

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 Tanima Banerjee

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