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Informist, Tuesday, Dec. 16, 2025

 

By Vaishali Tyagi

 

MUMBAI – Borrowing through short-term debt instruments remained low Tuesday with most issuers staying on the sidelines as there was a slight uptick in borrowing rates, dealers said. Rates rose due to muted participation by mutual funds, who are usually the most active participants in the market, they said. Mutual funds abstained from actively investing in the debt instrument amid low liquidity in the banking system due to ongoing outflows for advance tax payments.

 

Dealers see outflows of around INR 800 billion for advance tax payments Tuesday. Outflows for advance tax payments have drained liquidity from the banking system. According to market estimates, INR 700 billion to INR 1 trillion was paid for advance tax on Monday. The central bank's net absorption from the banking system – a proxy for the liquidity surplus – was INR 1.20 trillion Monday, down from INR 1.83 trillion Sunday. This fall was also because of the maintenance of 100?sh reserve ratio by banks during Saturday and Monday.

 

Market participants said only a few issuers with rollover needs are tapping the market, but overall supply is low. Issuers are aware investors, mainly mutual funds, are holding back due to tight liquidity conditions, while expecting higher returns. However, issuers are not comfortable with the current high rates.

 

"Issuers are waiting for liquidity to improve, hoping borrowing costs will come down and investors will show more interest in primary market when they have capital," a dealer at a brokerage firm said. "With advance tax outflows and low liquidity, rates are range-bound but remaining on the higher side. In the primary market, some quotes did not materialise into deals, so most activity was in the secondary market."

 

Most banks stayed away from the primary markets for the second consecutive day, dealers said. No certificates of deposit were issued by banks Tuesday. Indicative CD rates were up 2-3 basis points with three-month CD rates in the range of 5.99-6.04%, compared with 5.96-6.01% Monday. Rates on six-month and one-year CDs were at 6.29-6.36% and 6.47–6.58%, respectively. Some banks have met their roll-over requirements, while others will tap the market as their maturities approach, dealers said. These issuers are waiting for borrowing rates to fall.

 

Total issuances of commercial papers rose to INR 50.50 billion Tuesday from INR 5 billion Monday. Bajaj Finance Securities was the largest CP issuer, raising INR 25 billion through a three-month paper at 6.70%, and another big issuer was Kotak Securities, which borrowed INR 15 billion by issuing three-month paper at 6.70%. Other issuers were Aditya Birla Capital, ICICI Securities, Tata Projects, Godrej Industries, Julius Baer, and Axis Finance, which tapped the CP market to borrow capital. Most of the papers issued were of three-month maturity. "Most of the CP issuers who were present in the market have rollover requirements in near term... therefore, we saw some rise in (CP) issuances," the dealer quoted above said.

 

Rates on three-month paper issued by manufacturing companies rose 1-2 basis points higher but remained range-bound at 6.02-6.22% Tuesday from 6.00-6.20% Monday. Rates on similar maturity papers issued by non-banking finance companies were at 6.50-6.60% on Tuesday, broadly unchanged from the previous session. 

 

--Primary market

* Aditya Birla Capital, ICICI Securities, Tata Projects, Godrej Industries, Kotak Securities, Bajaj Finance Securities, Julius Baer, Axis Finance raised funds through CPs

* No bank raised funds through CDs

 

--Secondary market

* Canara Bank's CD maturing Wednesday was traded eight times at a weighted average yield of 5.3503%

* ICICI Securities' CP maturing Wednesday was traded four times at a weighted average yield of 5.3737%

 

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
Tuesday	Monday	Tuesday	Monday
126.65	97.60	54.95	51.05

 

End

 

Edited by Tanima Banerjee

 

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