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Informist, Wednesday, Nov. 26, 2025

By Vaishali Tyagi

MUMBAI – Funds raised through certificates of deposit remained high Wednesday due to slight fall in borrowing rates and for rollover requirement, dealers said. Rates fell due to strong demand from investors, particularly mutual funds, looking to invest in debt instruments to lock in funds at higher rates. Market participants are betting on a 25-basis-point rate cut by the Reserve Bank of India's Monetary Policy Committee next week, following RBI Governor Sanjay Malhotra's comments that economic data supports a rate reduction. The central bank will hold its bi-monthly policy meeting on Dec. 3–5.

Dealers said investors are sitting on ample cash due to a systemic liquidity surplus and are looking to lock in funds at higher rates. Mutual funds, which are major investors in short-term debt, are actively deploying their surplus funds. Short-term debt issuances also picked up as banks and companies sought to meet their rollover requirements. The central bank's net absorption from the banking system – a proxy for the liquidity surplus – was INR 1.34 trillion on Tuesday, slightly higher than INR 1.28 trillion Monday.

"Traders are actively buying, and there's ample interest in the market...and, this momentum has pushed rates down by 2-3 bps," a dealer at a brokerage firm said. "It's not huge, but aggressive buying has driven these (rates) down. Yesterday, CDs were trading above 93-95 levels (5.93-5.95%), but today rates are closer to 5.90-91%. We've seen some deals at that level, so rates have dropped." Traders are keeping a close eye on next week's MPC meeting. If there's a rate cut, rates could drop another 4-5 bps, the dealer said.

Three banks together raised INR 85.75 billion, marginally higher from INR 79 billion on Tuesday. Bank of Baroda was the largest CD issuer. The state-owned lender borrowed INR 52.50 billion through two CDs of different maturities. The bank raised INR 50.00 billion by issuing a three-month paper at 5.90% and borrowed INR 2.50 billion through CD maturing in one-year at 6.39%. Indian Bank tapped the short-term debt market to raise INR 7 billion through two papers of different maturities. Other issuers were Axis Bank and AU Small Finance Bank which raised INR 25 billion and INR 1.25 billion, respectively.

Dealers said indicative rates on three-month CDs fell by 2-3 bps Wednesday due to strong demand from mutual funds. Indicative rates on three-month CDs were 5.92-6.01%, marginally down from 5.96-6.02% on Tuesday. Rates on six-month and one-year CDs were steady at 6.20–6.23% and 6.40–6.45%, respectively.

Total issuances of commercial papers declined to INR 37.50 on Wednesday from INR 124.50 on Tuesday. National Housing Bank was the largest issuer. It raised INR 20 billion through a three-month CP at 5.87%. Small Industries Development Bank of India borrowed INR 6.00 billion through paper maturing in six months. Jio Credit raised INR 5.00 billion through papers maturing in three months. Other major CP issuers included Cholamandalam Finance and Aditya Birla Money.

Indicative rates on CPs remained unchanged Wednesday as most of the demand from issuers was easily met by investors. Rates on three-month papers issued by manufacturing companies remained unchanged from Tuesday at 6.03-6.12%. Rates on papers of similar maturity issued by non-banking finance companies were at 6.66-6.76%, also broadly unchanged from Tuesday. CP rates are currently steady, but a rate cut by the RBI could push the rates down by 4-5 bps, potentially leading to more CP issuances, dealers said.

--Primary market

* National Housing Bank, Jio Credit, Aditya Birla Money, SIDBI, Cholamandalam Finance raised funds through CPs

* Indian Bank, Bank of Baroda, Axis Bank, AU Small Finance Bank raised funds through CDs

--Secondary market

* Canara Bank's CD maturing on Thursday was traded three times at a weighted average yield of 5.3356%

* Reliance Retail Ventures' CP maturing Thursday was traded six times at a weighted average yield of 5.3021%

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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