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Informist, Monday, Jul. 7, 2025

By Vidhushi RajPurohit

MUMBAI – The dearth of issuances of certificates of deposit ended as banks tapped the short-term debt market to roll over their papers maturing in July, dealers said. Fresh CD issuances were, however, muted as the systemic liquidity remained above INR 4 trillion, lowering the need for banks to borrow funds, they said. Moreover, an absence of any major scheduled outflow also limited the borrowing, they said. 

"Now, the surplus is so high that for most banks it makes no sense to borrow anything more," a dealer at a state-owned bank said. "But, in the coming days, it will depend on whether there are some sudden needs or outflows."

On Sunday, the RBI net absorbed INR 4.09 trillion from the banking system, central bank data showed. Some traders expect the RBI to come up with more variable rate reverse repo auctions of a higher quantum of around INR 1.5 trillion to INR 2 trillion to suck out some of the excess liquidity. On Friday, the RBI conducted a seven-day variable rate reverse repo auction for INR 1 trillion. The more auctions of variable rate reverse repo will likely push up borrowing rates, dealers said. On Monday, the rates for three-month CD issuances remained unchanged at Friday's level of 5.79-5.85%.

Indian Bank and HDFC Bank, which together have an outstanding maturity of INR 110.5 billion in July, tapped the CD market to raise INR 27 billion. Indian bank, which has a maturity of INR 10 billion, raised an equivalent sum at 5.85% through a paper maturing in November. HDFC Bank raised INR 17 billion at 6.19% through a paper maturing in April. The private sector bank has an outstanding maturity of INR 100.50 billion for the month, Informist data showed.  

Total funds raised through commercial papers rose to INR 192 billion on Monday from nil Friday. The Indian Oil Corp. of India was the largest CP issuer, raising INR 30 billion at 5.53% through an intra-month paper. The other big issuer was the National Bank for Agriculture and Rural Development, which raised INR 22 billion through a December paper at 5.91%. The development financial institution has maturity worth INR 115.50 billion due in July, data showed. 

Amidst surplus liquidity, rates in the secondary market fell, which led to active selling by investors, dealers said. The interest was limited on the buying front, leading to a decline in market turnover. The turnover of certificates of deposit in the secondary market was INR 39.40 billion, down from INR 71.35 billion Friday. The total trades for commercial paper in the secondary market were at INR 44.10 billion, down from INR 48.20 billion in the previous day.

"Because the liquidity is so high, the market is down, and rates are low. So everyone wanted to sell paper and, compared to that buying fell short so secondary market volumes were low," a dealer at a private sector bank said. 

--Primary market

* ICICI Securities, Indian Oil Corp., National Bank for Agriculture and Rural Development, and Godrej Industries raised funds through CPs.

* Indian Bank and HDFC Bank raised funds through CD.

--Secondary market

* HDFC Bank's CD maturing Friday was traded once at a weighted average yield of 5.4235%.

* Infina Finance's CP maturing Tuesday was traded once at a weighted average yield of 5.3663%.

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

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Saji George Titus

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