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Informist, Friday, Jul. 25, 2025

By Vidhushi RajPurohit

MUMBAI – Activity in the primary market was muted as issuers were on the sidelines ahead of the weekend, dealers said. The borrowing rates ended steady after one to two basis points of movement in the early trade due to a lack of issuances, they said. 

Banks did not tap the borrowing market due to ample surplus liquidity in the banking system and the fact that they met their rollover requirements for the month, dealers said. Thursday, RBI net absorbed – a proxy for liquidity surplus – INR 2.56 trillion from the banking system, up from INR 2.17 trillion Wednesday. Banks have already exceeded their rollover needs by issuing certificates of deposit worth INR 344.60 billion in July against maturing papers worth INR 230.95 billion. 

Banks, which had lower funds, resorted to higher issuances earlier this week to manage the GST outflows, a dealer at a state-owned bank said. "Overnight rates were also higher at the start of the week, so that would have also made banks to issue CDs."

The outflows for goods and services tax are estimated to have drained around INR 1.75 trillion from the banking system. Earlier this week, the rates in the weighted average money market soared near the RBI's Marginal Standing Facility rate of 5.75% post the tax outflows. Overnight rates also jumped as banks had parked INR 2 trillion with the RBI last week at the seven-day, variable rate reverse repo auction. However, the indicative rates for the three-month CDs remained around 5.75-5.80%. 

No companies issued commercial papers after two companies raised INR 5 billion Thursday. Traders said companies have already met their rollover needs and therefore there was no need for additional fundraising. Companies raised INR 1.21 trillion through CPs so far in July, as against a total maturity of INR 1.01 trillion during the month.

Some mutual funds are also facing redemption pressure, which has reduced their investment appetite. In the secondary market, mutual funds were seen selling short-term papers to liquidate their holdings and meet their funding needs, dealers said. 

--Primary market

* No companies raised funds through CPs.

* No banks raised funds through CDs.

--Secondary market

* ICICI Bank's CD maturing Aug. 6 was traded nine times at a weighted average yield of 5.7508%.

* Indian Oil Corp.'s CP maturing Monday was traded eight times at a weighted average yield of 5.3944%.

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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