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Informist, Monday, Sept. 29, 2025

 

By Shravani Chandiwade

 

MUMBAI – Borrowing via certificates of deposit and commercial paper remained muted for the third consecutive day Monday. Lack of major funding needs kept borrowers on the sidelines. Mutual funds, which are major investors in short-term paper, were also not investing actively due to the month-end redemption pressure, dealers said. 

 

Banks are waiting for the month-end inflows from the government's payouts of salary and pensions, which are likely to have commenced in the later half of Monday, dealers said. These inflows are expected to add liquidity of INR 1.00 trillion to INR 1.50 trillion into the banking system, they said.

 

As per the latest data from the central bank, it net absorbed INR 469.41 billion Sunday, slightly higher than INR 464.22 billion Saturday. The net absorption figure is a proxy for the systemic liquidity surplus. Improvement in the systemic liquidity also kept banks away from borrowing in the short-term debt market, dealers said. "There will be hardly any issuances in the market as banks have fulfilled their maturities for this month," a dealer at a state-owned bank said.

 

Only two banks borrowed funds via CD Monday. Bank of Baroda and Union Bank of India both raised funds via three-month paper at the same rate, 5.93%. However, the former borrowed INR 7.00 billion and the latter raised INR 5.00 billion. CD issued Monday aggregated to INR 12.00 billion, similar to INR 11.00 billion Friday.

 

"MFs (mutual funds) are actively selling papers in the secondary market for liquidity," the dealer quoted earlier said. Issuers knew that mutual funds would charge high rates at the quarter-end and hence a majority of them met their borrowing and rollover requirements for September at lower rates earlier, dealers said.

 

With banks avoiding the market, indicative rates for CD did not move much. Indicative yields on three-month CD were 5.90-5.95% Monday, up slightly from 5.85-5.90% Friday. However, yields on paper with six-month and one-year maturity remained unchanged from Friday. Yields on six-month tenure CD were 6.10–6.15%, and those on one-year paper were 6.35–6.40%, dealers said.

 

"The MFs (mutual funds) charge high as they are facing a cash crunch but low funding needs from banks did not let rates spike," a dealer at another state-owned bank said.

 

CP issuances also remained low with only four companies tapping the market. "This quarter is over, so companies have already met their maturing paper and rollover requirements for the same," a dealer at a third state-owned bank said. Issuances in the CP market totalled INR 16.50 billion Monday, half of INR 33.00 billion raised Friday.

 

Bharat Heavy Electricals Ltd. was the largest issuer in the CP market Monday, raising INR 8.00 billion through paper maturing Dec. 24 at 6.28%. The other manufacturing company in the market, Godrej Industries, raised INR 1.50 billion via three-month paper at 6.20%. ICICI Securities and HDFC Securities also raised funds via three-month paper--the first at 6.68% for INR 5.00 billion and the latter at 6.73% for INR 2.00 billion.

 

Indicative rates on three-month CP issued by non-banking finance companies were 6.65-6.70%, down from 6.95–7.00% Friday, dealers said. However, yields on similar-term paper issued by manufacturing companies rose to 5.95-6.00%, from 5.85–5.90% Friday.  

 

--Primary market

* Godrej Industries, Bharat Heavy Electricals, ICICI Securities, HDFC Securities raised funds through CP.

* Bank of Baroda and Union Bank of India raised funds through CD.

 

--Secondary market

* HDFC Bank's CD maturing Wednesday was traded once at a weighted average yield of 6.1158%.

* Tata Steel Ltd.'s CP maturing Tuesday was traded four times at a weighted average yield of 5.5488%.

 

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:

 

Certificates of deposit		Commercial paper
Monday	Friday	Monday	Friday
45.30	13.35	10.20	28.55

 

End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Rajeev Pai

 

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