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Informist, Monday, Aug. 11, 2025

By Vidhushi RajPurohit

MUMBAI – Primary activity in the short-term debt market remained poor Monday. Dealers cited the muted appetite of mutual funds as the reason for low issuances. Mutual funds were also seen selling papers in the secondary market owing to some cash crunch, dealers said.

"There is some funding crunch from fundhouses' side as there were some companies who came to the market but the deals were not executed," a dealer at a mid-sized broking firm said. "In the secondary market also, rates remained higher by 2 bps (basis points) because right now, with the pause in (interest) rate cuts, there is no clear indicator in the market for rates." Last week, the Reserve Bank of India's Monetary Policy Committee left the repo rate unchanged at 5.50% and retained its "neutral" policy stance.

In the primary market, indicative rates for three-month commercial paper issued by non-banking finance companies rose slightly to 6.28-6.34% from 6.25-6.28% Friday. For paper issued by manufacturing companies, the rates were steady at 5.80-5.85%. The indicative rates for three-month certificates of deposit were also unchanged from Friday at 5.75-5.80%.

Companies and non-banking finance companies raised INR 13.25 billion Monday through CP. ICICI Securities and HDFC Securities were the major issuers. Each raised INR 4.00 billion through three-month paper. ICICI Securities borrowed the amount at 6.33%. For HDFC Securities, the rate was 6.34%.

CD issuances were also muted with no banks tapping the borrowing market due to low rollover requirements, dealers said. Banks also stayed away from issuances on account of ample transient and durable liquidity in the banking system, they said. As per the RBI's data, the central bank net absorbed INR 2.47 trillion from the banking system Sunday and banks parked INR 10.00 trillion as cash reserves with it. Moreover, the net durable liquidity in the banking system as on Jul. 25 was at a surplus of INR 5.58 trillion.

Traders expect CD issuances to remain muted this month as the total amount of CD due for maturity in August stands at INR 193.30 billion, lower than INR 230.95 billion in July. So far this month, banks have already issued CD worth INR 253.85 billion, according to data from Clearing Corp. of India collated by Informist.

Most dealers were of the view that CD issuances are likely to see a pick-up in September as banks tap the market to finance their quarter-end funding requirement and roll over maturing paper. So far, CD maturing in September amounts to INR 363.40 billion. However, the release of liquidity into the banking system after the cut in the cash reserve ratio is likely to offset some of the quarter-end demand, dealers said. At the June meeting of the rate-setting panel, the RBI had announced a cut of 100 bps in the CRR to 3% of banks' net demand and time liabilites. The cut will be implemented starting September. The reduction in CRR will be carried out in four equal tranches with effect from the fortnight beginning Sept. 6 and is expected to infuse liquidity to the tune of INR 2.50 trillion into the banking system.

"If the surplus liquidity shoots up sharply after the complete impact of CRR cut, then we might see CD issuances remaining low," a dealer at a private-sector bank said. "What has happened now is that this month, in the first week itself, many banks issued CD earlier than the maturity dates, so now there is a pause."

--Primary market

* Tata Projects, HDFC Securities, Kotak Securities, IGH Holdings, ICICI Securities Primary Dealership and Godrej Industries raised funds through CP

* No banks raised funds through CD

--Secondary market

* Bank of Baroda's CD maturing Tuesday was traded once at a weighted average yield of 5.3663%

* ICICI Securities's CP maturing Tuesday was traded twice at a weighted average yield of 5.3663%

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 Rajeev Pai

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