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Informist, Wednesday, Aug. 6, 2025

By Vidhushi RajPurohit

MUMBAI – Rates on short-term papers in the secondary market inched higher Wednesday after the Reserve Bank of India's Monetary Policy Committee kept repo rate and policy stance unchanged, dealers said. Though the policy outcome was largely along expected lines, yields rose slightly as the RBI Governor Sanjay Malhotra did not indicate scope for more rate cuts, they said. 

The rate-setting panel Wednesday unanimously voted to leave the policy repo rate unchanged at 5.50%. It also kept the policy stance unchanged at neutral. According to an Informist poll, 14 of the 17 economists had expected the MPC to keep the interest rates unchanged. The committee has lowered the repo rate by 100 basis points since February.

"Market was not expecting more rate cut, except for maybe a few people, but the stance was also kept neutral, so that impacted (market) sentiments," a dealer at a private sector bank said. "The rates will also come down again in a few days because liquidity surplus is quite high now."

The yield on three-month short-term debt instruments in the secondary market rose by nearly four basis points Wednesday. Mutual funds were the major participants in the market Wednesday, and they were seen both buying and selling papers maturing in three to six months, dealers said. 

Meanwhile, banks remained away from both the primary and secondary markets, dealers said. No bank issued a certificate of deposit Wednesday as dealers cited high systemic liquidity surplus as the reason for subdued borrowing appetite. The surplus liquidity in the banking system, as indicated by the RBI's net absorption of funds, remained near INR 4 trillion. Dealers also said caution ahead of the monetary policy kept most issuers away from the primary market. 

"It is actually normal for low issuances on policy day and you can see it happening on almost all policy days," a dealer at a brokerage firm said. "Otherwise, there was not much impact on rates (in the primary market)."

Fundraising through commercial papers fell to INR 25.5 billion Wednesday from INR 49 billion raised Tuesday. Only three companies tapped the market, with L&T Finance being the largest issuer. The non-banking financial company raised INR 12 billion through an intramonth paper at 6.10%. Bajaj Housing Finance raised INR 8.50 billion through a three-month paper at 5.85% and Canfin Homes mopped up INR 5 billion through a three-month paper at 5.92%. 

The borrowing rates in the primary market remained unchanged Wednesday due to subdued issuances, dealers said. The indicative rates for three-month CPs issued by manufacturing companies were steady 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 Tuesday. The indicative rates for the three-month CDs were also unchanged from Tuesday at 5.75-5.80%.

--Primary market

* L&T Finance, Bajaj Housing Finance and Canfin Homes raised funds through CPs

* No banks raised funds through CDs

--Secondary market

* Bank of India's CD maturing Thursday was traded five times at a weighted average yield of 5.2791%

* Tata Steel's CP maturing Thursday was traded three times at a weighted average yield of 5.2811%

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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