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Informist, Thursday, Jun. 12, 2025

By Siddhi Chauhan

MUMBAI – Borrowing through commercial paper fell Thursday as uncertainty about short-term borrowing rates kept investors and issuers away from the short-term debt market, dealers said. "There is not much demand from either side right now. It is very difficult to predict the trajectory of rates," a dealer at a mutual fund said.

On Thursday, borrowing through CPs fell to INR 19 billion from INR 21 billion Wednesday. Meanwhile, INR 30 billion was raised through certificates of deposit by a single issuer, up from INR 16.70 billion. Axis Bank was the sole CD issuer, raising the amount at 6.38% through a three-month paper. On Wednesday, HDFC Bank was the sole issuer, raising INR 16.70 billion through a three-month paper at 5.78%.

On the CP segment side, National Bank for Agriculture and Rural Development was the largest CP issuer, raising INR 8 billion through a three-month paper at 5.86%, followed by Kotak Securities, raising INR 4 billion through a three-month paper at 6.27%. 

"It is very difficult for me to say where the rates will be in the coming week," a dealer at a brokerage firm said. "I do expect an upward trajectory because quarter end usually has a large sum of outflows, but the possibility of VRR (variable rate repo) is also there. If RBI comes with short-term VRRs, rates might not rise as much."

Some market participants expect borrowing costs to rise in the coming days due to outflows for advance tax, dealers said. Outflows for corporate advance tax payments are expected to drain around INR 1.2 trillion-INR 1.5 trillion from the banking system, dealers said. The market is yet to analyse the impact of the Reserve Bank of India skipping the 14-day variable rate repo operation on the borrowing costs, dealers said. 

The Reserve Bank of India's decision to skip the 14-day VRR comes at a time when surplus liquidity in the banking system has averaged around INR 2.5 trillion in June, but is set to reduce sharply in the coming fortnight due to outflows for advance tax and goods and services tax payments. This may push the surplus to near neutral for the first time since late April.

However, some market participants said they don't expect the short-term borrowing costs to be impacted as the current liquidity is sufficient, dealers said. The possibility of the central bank coming up with a short-term variable rate repo is also keeping these market players optimistic, dealers said. On Wednesday, the RBI net absorbed INR 2.58 trillion, marginally lower than INR 2.62 trillion Tuesday, central bank data showed.

Indicative rates on three-month papers issued by non-bank finance companies were unchanged from Wednesday at 6.20–6.40%. Similar tenor papers issued by manufacturing companies were flat at Wednesday's level of 5.90–6.10%. Indicative rates on three-month CDs issued by banks were also at Wednesday's levels of 5.80–6.00%. 

--Primary market

* ICICI Securities, Kotak Securities, National Bank for Agriculture and Rural Development, SBI Capital Securities and Bajaj Finance Securities raised funds through CPs.

* Axis Bank raised funds through CDs.

--Secondary market

* Union Bank's CD maturing Tuesday was traded once at a weighted average yield of 5.5000%.

* Indian Oil Corp.'s CP maturing Friday was traded six times at a weighted average yield of 5.2641%.

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 Saji George Titus

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