More Stories

Informist, Wednesday, Sept. 3, 2025

 

By Vidhushi RajPurohit

 

MUMBAI – Despite ample surplus liquidity in the banking system, August turned out to be an active month for certificate of deposit issuances largely due to rise in borrowing by public sector banks. State-owned banks likely ramped up their borrowings due to the cyclical rise in requirement for funds towards the end of the quarter, market participants said.

 

CD issuances in August rose sharply both month-on-month and relative to maturities. Issuances during the month aggregated nearly INR 700 billion, outpacing the maturities by around four times, according to data from Clearing Corp. of India, collated by Informist. The total amount of maturities in August was INR 193.3 billion. On month, the issuances jumped up by 59%. However, the total issuances fell by 15% on year.

 

Public sector banks drove the surge, borrowing a hefty sum of INR 448.50 billion through CDs, with only INR 44.00 billion due for maturities. The fresh issuance by these banks hit INR 293.00 billion and the net new issuances were at INR 122.00 billion. State-owned banks redeemed a mere INR 10.00 billion of their maturity quantum for the month.

 

"PSU banks were probably cushioning against the upcoming busy season," a dealer at a large state-owned bank said. "This was not a system-wide issue as liquidity was sufficient, even amongst the PSU banks there were a few who were more aggressive, and it was also because of some individual requirements." The surplus liquidity in the banking system as indicated by the Reserve Bank of India's net absorption of funds averaged INR 2.78 trillion in August, slightly lower than INR 3.04 trillion in July.

 

Surplus liquidity is expected to widen slightly after the first tranche of cash reserve ratio cut starting Saturday. The RBI cut the cash reserve ratio by 100 basis points to 3% of banks' net demand, and time liabilities, Governor Sanjay Malhotra had said in the June Monetary Policy Committee's outcome. The cut in banks' cash reserve ratio, which is expected to add around INR 2.5 trillion to the banking system liquidity, will be carried out in four equal tranches with effect from the fortnight beginning Saturday.

 

However, market participants expect the surge in liquidity to be offset by the upcoming outflows for advance tax payment in the second-half of September, which is expected to drain around INR 1.5 trillion from the banking system. "Rupee is under pressure and we have outflows also in September. So we will need to wait and see how the RBI utilises the surplus," a dealer at another state-owned bank said. "Banks are therefore not holding back on borrowing even though there is surplus."

 

Bank of Baroda remained the top CD issuer for the second month in a row. It raised INR 227.25 billion, which accounted for nearly 33% of the total issuances. Amongst state-owned banks, the next big issuer was Canara Bank, which mopped up INR 85.00 billion.

 

"If you see the CD rates, CD rates are still much more competitive compared to the bulk term deposit rates. I think the spread is more than 100 basis point for the bulk term deposit and CD rates," Soumyajit Niyogi, director, India Ratings & Research, said. State Bank of India, the country's largest public sector bank, offers 6.05% on fixed deposits maturing between 211 days and less than a year for regular customers. In August, the indicative rates for three-month CD were 5.75-5.80%. 

 

Issuances by private sector banks also surpassed the maturity amount for August. They issued CD worth INR 247.85 billion, against INR 140 billion set to mature during the month. Amongst private sector banks, Axis Bank was the top CD issuer in August as it raised INR 90.35 billion, followed by HDFC Bank which raised INR 63.50 billion.

In August, IndusInd Bank also tapped the market after a gap of five months and raised INR 54 billion through three-month CDs. The borrowing rate was sharply higher for the private sector lender due to the reluctance of investors to invest in the bank's debt following the disclosure of certain accounting discrepancies in its derivatives accounting and microfinance loan portfolio, dealers said. The bank issued the papers at 6.30%, a premium of over 45 basis points above the prevailing rate for three-month CDs.

 

COMMERCIAL PAPERS

In contrast to CD issuances, fundraising through commercial papers fell on-month and on-year. Issuances were largely limited to rollover transactions, as corporates and non-banking financial companies focussed on replacing maturing papers rather than ramping up fresh borrowing, market participants said.

 

"Rates were mostly steady, and the liquidity conditions were also good and, if you see the maturity sum was high enough that most of the demand was just to refinance those papers," a dealer at a mid-size brokerage firm said.

 

The total quantum of CPs due for maturity in August was INR 1.20 trillion, against which issuances amounted to INR 1.01 trillion. Issuances slipped by 28.5% on month and on year there was a drop of 22%. Non-banking financial companies issued CPs worth INR 511.38 billion, whereas manufacturing companies mopped up INR 464.63 billion.

 

"The CPs by NBFCs were quite strong, quite healthy in August, compared to the corporates," a dealer at a mutual fund said. "This is basically the lower rates. And obviously, they are finding it attractive." In August, rates on three-month papers issued by non-banking financial companies were 6.20-6.25%, unchanged from the previous month. Rates on CPs of manufacturing companies were also unchanged at 5.80-5.85%.

 

Amongst non-banking financial companies, ICICI Securities was the top CP issuer in August, raising INR 47.95 billion. However, the company fell short of the total maturity for August, which was INR 61.75 billion. The next big issuer was Kotak Securities, which borrowed INR 37.25 billion. Market participants expect non-banking financial companies to continue to lead the total issuances in September. "The start of the festive season is the peak season for the NBFCs particularly focused on retail lending, so they will be active in the market," the dealer at the mutual fund said. 

 

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

 

CD	August 2025	July 2025	On-month%	August 2024	On-year%
State-owned banks	448.5	234.75	91.05	523.25	(-)14.29
Private Sector Banks	247.85	175.1	41.55	296.95	(-)16.53
Others	-	21	(-)100.00	-	-
Foreign Banks	0.25	6.6	(-)96.21	-	-
Total	696.6	437.45	59.24	820.20	(-)15.07

 

CP	August 2025	July 2025	On-month%	August 2024	On-year%
Non-banking finance companies	511.38	704.82	(-)27.45	751.16	(-)31.92
Manufacturing	464.63	745.07	(-)37.64	612.05	(-)24.09
Housing Finance	97.85	72.55	34.87	48	103.85
REIT	22.4	10.95	104.57	-	-
Total	1096.26	1533.39	(-)28.51	1411.21	(-)22.32

 

 

 

 

 

 

 

 

 

End

 

Edited by Ashish Shirke

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2025. All rights reserved.