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Informist, Friday, Dec. 5, 2025

By Vaishali Tyagi

MUMBAI – Rates on short-term papers in the secondary market fell Friday after the Reserve Bank of India's Monetary Policy Committee reduced the repo rate by 25 basis points, dealers said. A rate cut also makes borrowing cheaper, which boosts issuers appetite to raise funds, they said. 

The rate-setting panel Friday lowered the policy repo rate to 5.25% in a unanimous decision, the central bank Governor Sanjay Malhotra said. The committee also retained the 'neutral' policy stance but external member Ram Singh was of the view that the stance be changed to accommodative. While the rate-setting panel's decision was broadly on expected lines, a large section of economists and market participants had said the MPC could hold interest rates after GDP data showed the economy had expanded much quicker than expected in the September quarter.

"As some market participants were expecting rate cut, it came on their expected lines, which cooled-off borrowing rates...therefore, now borrowing conditions were more favourable of issuers due to fall in rates as they (fell) immediately after cut in repo rate," a dealer at a brokerage firm said. "Investors will also come to the market to take advantage of ample liquidity present in the system."

Fundraising through commercial papers rose significantly on rate decision day. Fundraising through CPs rose to INR 125.75 billion Thursday from INR 5.00 billion raised Thursday. Thirteen companies tapped the market, with Small Industries Development Bank of India being the largest issuer. The financial institution raised INR 60 billion through three-month paper at 5.90%. ICICI Securities raised INR 12 billion through a three-month paper at 6.43% and Aditya Birla Housing Finance mopped up INR 8.25 billion through a three-month paper at 5.95%. Other major issuers included Reliance Retail Ventures, Julius Baer Capital, Birla Group Holding, Axis Securities, HDFC Securities. 

Meanwhile, banks stayed away from both the primary and secondary markets, dealers said. Only one bank issued a certificate of deposit Friday, significantly down from Thursday's INR 75 billion as dealers cited high systemic liquidity surplus as the reason for subdued borrowing appetite. The central bank's net absorption from the banking system--a proxy for liquidity surplus--was INR 2.66 trillion Thursday, higher than INR 2.56 trillion Wednesday. Bank of India raised INR 8.5 billion through three-month CP at 5.90%. 

The rate on three-month short-term debt instruments in the secondary market fell by nearly three-to-four basis points Friday. Mutual funds were the major participants in the market Friday and they were seen both buying and selling papers maturing in three to six months, dealers said. Meanwhile, banks remained away from both the primary and secondary markets, dealers said. Indicative rates on three-month CDs were 5.92-6.00%, from 5.98-6.03% on Thursday. Rates on the six-month and the one-year CDs rose to 6.22-6.27% and 6.39–6.43%, respectively. 

The borrowing rates in the CP fell Friday, dealers said. Rates on three-month papers issued by manufacturing companies were at 5.98-6.15% Friday, down from 6.03-6.13%. Rates on papers of similar maturity issued by non-banking finance companies were at 6.58-6.68%, down from Thursday's 6.62-6.72%. 

--Primary market

* Small Industries Development Bank of India, Aditya Birla Housing Finance, Reliance Retail Ventures, ICICI Securities, Axis Securities, HDFC Securities, Kotak Securities, SBI Capital Securities, Julius Baer Capital, Birla Group Holding, Birla Group Holding, Aditya Birla Money, Motilal Oswal Financial Services raised funds through CPs

* Bank of India raised funds through CDs

--Secondary market

* Indian Bank's CD maturing on Monday was traded four times at a weighted average yield of 5.3329%

* Reliance Retail Ventures's CP maturing Monday was traded seven times at a weighted average yield of 5.3395%

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 Akul Nishant Akhoury

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