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Informist, Tuesday, Aug. 5, 2025

 

By Vidhushi RajPurohit

 

MUMBAI – Issuances of certificates of deposit slowed down in July month-on-month and year-on-year, as banks kicked off the quarter to September with modest funding needs amid ample liquidity surplus in the banking system. Though lower, issuances surpassed the maturities due in July as state-owned banks front-loaded some of their borrowing, and locked in funds before money market rates begin to inch higher, market participants said.

 

"Maybe there was front loading on future maturities also. Because the CRR (cash reserve ratio) cut is also there so, they thought that as CD will mature that day I can go to market to rollover or if there is enough liquidity then I could even redeem my paper," a dealer at a state-owned bank said.

 

Banks raised INR 437.45 billion through CDs in July, sharply lower than the INR 1.31 trillion raised in June, according to data from Clearing Corp. of India collated by Informist. On a year-on-year basis, CD issuances were down nearly 54% from the INR 671.60 billion raised in June last year.

 

Despite the sharp fall in issuances, banks still raised more than 47% of the redemptions due in July, which was INR 230.95 billion. State-owned banks accounted for nearly 54% of the total issuances, while their maturity amount was a mere INR 47.25 billion. Amongst public sector banks, Bank of Baroda and India Bank were the largest CD issuers in July, raising INR 94.75 billion and INR 81.00 billion, respectively.

 

CD issuances by private sector banks fell by 4.4% against their maturities to INR 175.10 billion. In July, HDFC Bank raised the highest quantum at INR 97.75 billion and its quantum of CDs that matured in July was also the largest at INR 100.50 billion.

 

"Credit offtake is not high at quarter start so most banks only had some rollover needs," a dealer at a private sector bank said. "It would have been surprising if the CD amount was more when liquidity stayed at such a high surplus. Even now, you are seeing banks not coming that frequently in the market."

 

Credit offtake of banks grew 9.8% on year to INR 184.63 trillion as of Jul. 11 while deposits grew 10.2% on year to INR 233.26 trillion. The surplus liquidity in the banking system as indicated by the Reserve Bank of India's net absorption of funds averaged to INR 3.04 trillion in July, up from INR 2.74 trillion in June.

 

Lower issuances and surplus systemic liquidity kept the CD rates broadly steady throughout the month, dealers said. The indicative rates for three-month CD were 5.75-5.80% in July. Market participants are of the view that the borrowing rates will likely remain around the current levels until there is a pickup in bank loan disbursements.

 

"I think on the rate side, we are good, it (rate cut transmission) has taken place and in the supply side of money also it's all good," the dealer at the state-owned bank said. "But it's the demand side of the company that needs to be seen. So, demand side need to pick up enough to justify credit for it."

 

COMMERCIAL PAPERS

Fundraising through commercial papers rose on year and was also higher than the papers due for maturity in July. The rise in issuances was largely fuelled by manufacturing companies flocking to the short-term debt market to borrow funds at cheaper rates, market participants said.

 

"Non-NBFCs normally are not that active in the market. So you will find NBFCs only issuing lot of papers," said Alok Singh, group head-treasury at CSB Bank. "Now what has happened is that this place where they have made liquidity easier is prompting other sectors also which were not usually the market players, to come and borrow."

 

In July, CPs issued by manufacturing companies were INR 745.07 billion, up nearly 46% on year and 16% higher than June. The companies also exceeded their maturities by 38%. Of the total funds raised, new issuances by companies amounted to INR 401.08 billion. Indian Oil Corp. was the largest CP issuer, raising INR 148.50 billion, which was more than three times its July maturity figure of INR 40.00 billion.

 

Total funds raised through CPs were INR 1.53 trillion in July, climbing over 31% on year and also exceeding the month's redemption by 33.9%. However, a high base in June led issuances to fall by nearly 4% on month. CP issuances in June had jumped to a three-month high of INR 1.59 trillion due to quarter-end requirements.

 

CP issuances by non-banking financial companies slowed, declining 26.8% on month to INR 704.82 billion. However, the amount was higher than INR 568.44 billion raised by non-banking lenders last year. National Bank for Agriculture and Rural Development and Small Industries Development Bank of India were the two major borrowers, raising INR 104.20 billion and INR 95.00 billion, respectively. 

 

With the banking system flush with liquidity, yields on three-month CPs cooled-off in July, market participants said. On Jul. 31 rates on the three-month paper issued by non-banking financial companies were at 6.20-6.25%, down by 5 basis points from June. Rates on CPs of manufacturing companies were at 5.80-5.85%, down by nearly 20 bps from June. "As the market goes into surplus liquidity mode these rates start falling themselves without the rate cut also," Singh said.

 

Following are details of CP and CD issued in July, as per data sourced from the Clearing Corp. of India and compiled by Informist. Amounts in INR billion:

 

CD	Jul-25	Jun-25	On-month%	Jul-24	On-year%
State-owned banks	234.75	846.6	(-)260.64	408.50	(-)74.01
Private Sector Banks	175.1	441.1	(-)151.91	263.1	(-)50.26
Others	21.0	20.0	4.76	-	-
Foreign Banks	6.6	1.0	84.85	-	-
Total	437.45	1308.7	(-)199.17	671.60	(-)53.53

 

CP	Jul-25	Jun-25	On-month%	Jul-24	On-year%
Non-banking finance companies	704.82	893.65	(-)26.79	568.44	19.35
Manufacturing	745.07	627.89	15.73	403.1	45.90
Housing Finance	72.55	55.75	23.16	74.15	(-)2.21
REIT	10.95	14.15	(-)29.22	-
Total	1533.39	1591.44	(-)3.79	1045.69	31.81

 

 

 

 

 

 

 

 

End

 

Edited by Ashish Shirke

 

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