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Informist, Friday, Jul. 18, 2025

By Vidhushi RajPurohit

MUMBAI – Banks remained on the sidelines with no certificate of deposit issuance for the second consecutive day on account of low roll-over needs, dealers said. Surplus liquidity, as indicated by the Reserve Bank of India's net absorption of funds from the banking system, averaged INR 3.38 trillion so far this month. This has further lessened banks' need for fresh funds, they said. 

So far in July, banks have already raised funds aggregating INR 155.0 billion through CD, and the total funds due for maturity stood at INR 165.04 billion, according to data compiled by Informist. Most banks which tapped the short-term debt market this month were mostly on account of roll-over needs, dealers said. Slow credit offtake at the start of the quarter and heavy fundraising in June were also some of the reasons cited by traders for the lacklustre issuances. Fundraising through CDs in June increased 62% on month, touching INR 1.31 trillion.

"Those who had needs have already borrowed and now there is no need for fresh funds because liquidity is in surplus," a dealer at a state-owned bank said. "Activity will only rise now towards quarter end or if there is any sudden impact on surplus liquidity." The RBI Thursday net absorbed INR 3.09 trillion from the banking system, central bank data showed. 

On account of subdued activity, the borrowing rates remained unchanged, dealers said. The indicative rates for three-month CD issued by banks were similar to Thursday's levels at 5.75-5.80%. However, traders expect the rates to inch up slightly next week after the central bank's INR-2-trillion variable rate reverse repo auction, they said. The RBI Friday conducted a seven-day variable rate reverse repo auction and accepted INR-2.00-trillion offers. It set the cut-off rate at 5.49%. Additionally, outflows for goods and services tax payment will also commence Monday, which could further push up the borrowing rates. Traders have estimated the outflow to be around INR 1.75 trillion.  

Issuances of commercial papers also declined on Friday with companies raising only INR 3.50 billion, down from INR 139.25 billion. Only two companies tapped the market as most refrained from borrowing ahead of the upcoming weekend, dealers said. ICICI Securities was the largest CP issuer for the day. The company raised INR 2.5 billion through an 11-month paper at 6.65%. 

--Primary market

* ICICI Securities and Tata Capital Housing raised funds through CPs.

* No banks raised funds through CDs.

--Secondary market

* Bank of India's CD maturing Aug. 12, 2025 was traded once at a weighted average yield of 5.5706%.

* Tata Steel Ltd.'s CP maturing Monday was traded twice at a weighted average yield of 5.4249%.

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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