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Informist, Thursday, Oct. 16, 2025

By Vaishali Tyagi

MUMBAI – Borrowing through certificates of deposit and commercial papers fell Thursday, as low funding needs kept borrowers on the sidelines. However, activity in the secondary market picked up significantly, dealers said. Mutual funds, which are major investors in short-term debt, were active in the secondary market, engaging in both buying and selling.

As per the Reserve Bank of India's latest data, the central bank's net absorption from the banking system – a proxy for systemic liquidity surplus – was INR 1.30 trillion Wednesday compared to INR 1.28 trillion Tuesday. Dealers said the central bank injects liquidity through variable rate repo auctions when there's a shortage, which helps in maintaining comfortable liquidity conditions in the system and leads to low requirement of funds. 

The RBI will hold a three-day variable rate repo auction for INR 500 billion from 0930 IST to 1000 IST Friday, the central bank said Thursday. The reversal of the tender will take place Monday.

"Market is currently comfortable, with sufficient liquidity, reducing the need for funds...while there was some activity in the secondary market, including big-ticket trades in January, March, and June papers, the primary market remained relatively dull compared to yesterday (Wednesday)," a dealer at a brokerage firm said. "Overall, market participants seem to be in a comfortable position, with low funding requirements."

CD issuances declined to INR 31 billion Thursday from INR 42.5 billion Wednesday. Banks that had been absent from the market for the past few days have returned to the short-term debt market this week to meet their lending and rollover requirements for October, dealers said. Bank of Baroda was the biggest CD issuer Thursday. It raised INR 20 billion through a one-year paper at 6.39%. Small Industries Development Bank of India raised INR 7 billion at 6.45% and IDFC Bank raised INR 4 billion via eight-month CD at 6.39%.

Dealers said despite primary market issuances, secondary market rates have remained broadly steady. Activity is expected to pick up after the Diwali holidays. Indicative rates for three-month CDs were 5.86-5.97%, unchanged from Wednesday. Yields on papers maturing in six months and one year also remained unchanged at 6.12–6.22% and 6.38–6.45%, respectively, dealers said.

Borrowing through CPs fell significantly Thursday due to requirement-based trading by non-banking financial institutions and manufacturing companies, dealers said. On Thursday, INR 6 billion was raised through commercial paper, down from INR 28.25 billion Wednesday. Axis Securities was the largest CP issuer, raising INR 5.0 billion through a three-month paper at 6.68%. Kotak Mahindra Investment borrowed INR 1 billion via 11-month paper at 6.90%.

The indicative rates in the CP market also remained unchanged. Rates on three-month CP issued by manufacturing companies were 5.95-6.05%, unchanged from Wednesday. Rates on similar maturity papers issued by non-banking financial companies also were unchanged at 6.65-6.75%.

--Primary market

* Axis Securities and Kotak Mahindra Investment raised funds through CPs

* IDFC First Bank, Bank of Baroda, and SIDBI raised funds through CDs

--Secondary market

* HDFC Bank's CD maturing Friday was traded twice at a weighted average yield of 5.7853%

* Bharti Telecom's CP maturing Friday was traded sixteen times at a weighted average yield of 5.4967%

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 Ashish Shirke

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