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Informist, Tuesday, Aug. 5, 2025

By Vidhushi RajPurohit

MUMBAI – Issuances of certificates of deposit remained low Tuesday owing to a flush of funds in the banking system, dealers said. Bank of Baroda was the sole CD issuer, borrowing INR 15 billion through a three-month paper at 5.75%. Most banks were on the sidelines as dealers cited low rollover requirements and slow credit pickup at the start of the month. Some issuers also refrained from tapping the market ahead of the RBI's Monetary Policy Committee meeting outcome Wednesday, dealers said. 

"Rates are still low, but banks are not coming to the market because you look at the surplus level, which is very high right now," a dealer at a private sector bank said. "Tomorrow is the rate decision and people are waiting to get clarity there also before borrowing anything now."

On the liquidity front, the central bank net absorbed INR 4.00 trillion from the banking system Monday, slightly lower than INR 4.10 trillion Sunday. Market participants now keenly await the rate-setting panel's decision Wednesday. Traders widely expect the central bank to keep the rates unchanged. Few market participants see room for further policy easing, given that inflation is at a six-year low and due to looming worries over slowing economic growth. In June, the Monetary Policy Committee had cut the repo rate by a larger-than-expected 50 basis points to 5.50% and changed the stance to neutral from accommodative. 

In case of a further rate cut, traders expect the borrowing rates in the short-term debt market also to edge lower. On Tuesday, the indicative rates for the three-month CDs were at 5.75-5.80%, unchanged from Monday. 

On the commercial papers front, issuances rose on account of big-ticket issuances by Indian Oil Corp., Bharat Heavy Electricals and Bajaj Housing Finance. They raised a cumulative sum of INR 40 billion, out of the total borrowing of INR 49 billion through commercial papers. Indian Oil Corp. raised INR 20 billion through a three-month paper at 5.80%. Bharat Heavy Electricals borrowed INR 10 billion through a paper maturing in September at 6.07%. Bajaj Housing Finance raised INR 10 billion through a three-month paper at 5.85%.

The indicative rates for three-month CPs issued by manufacturing companies were unchanged at 5.80-5.85%. For non-banking financial institutions, the rates for three-month papers were at 6.25-6.28%, the same as Monday. 

Meanwhile, banks and mutual funds were seen actively buying CDs in the secondary market on account of surplus funds with them, dealers said. Papers maturing in October to December were actively traded. Long-term papers remained out of favour as dealers cited a lack of clarity on the rate-cut trajectory. Total CD turnover in the secondary market was at INR 124.25 billion Tuesday, up from INR 109.50 billion Monday. For CP, the volume was INR 63.35 billion, slightly down from INR 86 billion. 

--Primary market

* Bharat Heavy Electricals, Indian Oil Corp., Bajaj Housing Finance, Kotak Securities and ICICI Securities raised funds through CPs

* Bank of Baroda raised funds through CDs

--Secondary market

* Bank of Baroda's CD maturing Wednesday was traded 11 times at a weighted average yield of 5.2647%

* Mangalore Refinery and Petrochemicals' CP maturing Wednesday was traded four times at a weighted average yield of 5.3586%

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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