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Informist, Monday, Aug. 25, 2025

By Vidhushi RajPurohit

MUMBAI – Banks remained away from the short-term debt market for the second consecutive day after having exceeded the rollover target for August. Fundraising through certificates of deposit was nil and consecutively, borrowing rates also held steady, dealers said. 

In August, so far, banks have issued CDs worth INR 602.10 billion, more than double from the total sum for maturity, which stood at INR 193.30 billion. The liquidity in the banking system also remained in surplus, as the latest RBI data showed that the central bank net absorbed INR 1.64 trillion from the banking system on Sunday, which was lower than INR 2.19 trillion Friday. The surplus liquidity narrowed post the outflows for goods and services tax payouts. However, dealers do not expect the narrowed surplus to lead to an uptick in banks' primary issuances. 

"This crunch in liquidity surplus is due to GST outflows which happened last week", a dealer at a state-owned bank said, "but it will eventually ease up later this week once the month-end inflows start." Inflows from the government's salary and pension payments are expected to lead add around INR 1.50 trillion to INR 1.80 trillion to the banking system. 

On account of muted issuances, the borrowing rates for CD remained unchanged Monday. The indicative rates for three-month CDs were 5.80%-5.85%, for six months remained at 6.05%-6.06% and for one-year paper these were 6.30-6.35%, dealers said.

On the commercial papers front, issuances climbed up on the back of big-ticket issuance by Reliance Retail Ventures. Total CP issuances jumped to INR 54.75 billion, from INR 36.30 billion Friday. Of the total issuances, Reliance Retail Ventures raised INR 35 billion through a three-month paper at 5.87%. The other major issuer was Aseem Infrastructure Finance, which also issued a three-month paper at 6.60% and mopped up INR 5 billion. Rates on the CP also remained unchanged despite the large quantum of fundrasing as the issuances were easily absorbed by mutual funds, dealers said. 

Rates on commercial papers issued by manufacturing companies were at 5.85–5.90%, unchanged from Friday. Similarly, papers of the same maturity from non-banking financial companies also quoted the same rate as Friday, which was 6.20-6.25%. Traders expect short-term debt market rates to slightly rise later this week owing to some redemption pressure on mutual funds, which is usual during month-end.

"There is slight pressure on MFs now, but there is not that significant crunch from their end right now," a dealer at a brokerage firm said. "In secondary, some (mutual funds) were selling papers of one to two month tenures."

--Primary market

* Kotak Securities, Aditya Birla Capital, Aseem Infrastructure Finance, Bajaj Group Holdings, SBI Capital Securities, Reliance Retail Ventures raised funds through CPs

* No banks raised funds through CD

--Secondary market

* Canara Bank's CD maturing Tuesday was traded twice at a weighted average yield of 5.4576%

* Birla Group Holdings's CP maturing Tuesday was traded seven times at a weighted average yield of 5.5462%

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 Deepshikha Bhardwaj

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