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Informist, Wednesday, Jun. 18, 2025

By Siddhi Chauhan

MUMBAI – Borrowing through certificates of deposit surged Wednesday as banks borrowed funds to roll over their maturing papers, dealers said. High credit offtake also prompted some banks to tap the short-term debt market, they added. This week, commercial papers worth INR 226.53 billion and certificates of deposit totalling INR 146.25 billion are due to mature, data available from the Clearing Corp. of India compiled by Informist shows.

On Wednesday, CDs worth INR 202 billion were raised, sharply higher from INR 79 billion raised Tuesday. Union Bank of India was the largest CD issuer. The bank raised a total of INR 70 billion through two papers of different maturities. While the three-month paper issued by the bank was raised at 5.90%, the one-month paper was raised at 5.89%. Canara Bank raised INR 62 billion through a three-month paper at 5.90%. On Tuesday, Punjab National Bank was the largest CD issuer. It raised around INR 50 billion alone through two papers maturing in one month and three months at 5.88%.

The surge in issuances was despite ample liquidity in the banking system. On Tuesday, the Reserve Bank of India net absorbed liquidity to the tune of INR 2.90 trillion, slightly higher than INR 2.68 trillion on Monday, data showed. Funds parked under the RBI's Standing Deposit Facility also increased to INR 3.00 trillion Tuesday from INR 2.78 trillion the previous day.

"Even though we have good amount of liquidity, demand from banks is quite high because of redemption pressure and credit offtake," a dealer at a state-owned bank said. "Since this is quarter end, credit off take will be high only."

The high demand resulted in short-term borrowing costs on the three-month paper issued by banks to rise by 2 basis points from Tuesday, dealers said. On Wednesday, the rates on three-month papers issued by banks were quoted at 5.90-6.10%.

On the other hand, CP issuances fell as many issuers had raised a fair share in the previous working day, dealers said. On Wednesday, borrowing through CPs fell to INR 15.25 billion from INR 107.75 billion Tuesday. Kotak Securities was the largest CP issuer. It raised INR 4.5 billion through a three-month paper at 6.30%, followed by ICICI Securities, which raised INR 4 billion through a three-month paper at 6.27%. On Tuesday, National Bank for Agriculture and Rural Development was the largest CP issuer, raising INR 57 billion ahead of maturity of CPs worth INR 41.75 billion.

"Yesterday a lot of funds were raised. Most of the issuers had already frontloaded ahead of their maturities in fear of a rise in rates going forward," a dealer at a brokerage firm said. "Rates are expected to rise as generally quarter end sees a lot of demand from issuers due to high maturities."

On Wednesday, indicative rates on three-month papers issued by non-banking financial companies rose by 2 bps to 6.30-6.50% while rates on three-month papers issued by manufacturing companies were around Tuesday's level of 5.96-6.12%.

--Primary market

* ICICI Securities, Axis Securities, Kotak Securities, HDFC Securities, and SBI Factors raised funds through CPs.

* Bank of Baroda, HDFC Bank, Canara Bank, and Union Bank of India raised funds through CDs.

--Secondary market

* Bank of India's CD maturing Thursday was traded twice at a weighted average yield of 5.2634%.

* Bajaj Financial Securities' CP maturing Thursday was traded thrice at a weighted average yield of 5.2842%.

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 Subhojit Sarkar

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