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Informist, Tuesday, Dec. 23, 2025

By Vaishali Tyagi

MUMBAI – Fundraising through short-term debt instruments fell Tuesday with most issuers staying on the sidelines as there was a slight uptick in borrowing rates, dealers said. Rates rose marginally 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. Outflows for goods and services tax payments from Friday to Monday and advance tax payments early last week led to a liquidity crunch in the banking system.

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

Traders are expecting some correction in rates in near term which will bring issuers back to the market. "Since the short-term debt market is liquidity-driven, issuers are also waiting for liquidity to return in the banking system, which will attract investors, mainly mutual funds as they are primary investors but these days they are also facing redemption pressure," a dealer at a brokerage firm said. The RBI's net injection into the banking system--a proxy for the liquidity deficit--was INR 548.52 billion on Monday, slightly lower than the net injection of INR 577.21 billion on Sunday.

No company raised funds through commercial papers on Tuesday, compared with INR 29.25 billion on Monday. Most companies stayed on the sidelines, expecting rates to fall in the near term. Dealers said issuances also dropped as many non-banking companies with maturities had already raised funds and had no immediate need for funds. Volume in the secondary market of CP also fell Tuesday to INR 34.25 billion from INR 50.10 on Monday. Indicative rates on CP remained unchanged as demand from issuers was met easily by investors. Rates on three-month CP issued by manufacturing companies were 6.05-6.15%. Rates on CP of similar maturity issued by non-banking financial companies were 6.50-6.60%. 

Primary borrowing through CDs fell to INR 46 billion Tuesday compared with one issuance of INR 69 billion Monday. Indicative rates on three-month CDs rose to 6.03-6.07% Tuesday from Monday's 6.00-6.05%. Rates on six-month and one-year CDs were 6.40-6.47% and 6.60–6.67%, respectively. "Some banks have met their roll-over requirements, others will tap the market as maturities approach but key issuers are waiting for rates to fall which will effectively show the incremental rise in volume of primary maket issuances," a dealer at another brokerage firm said.

Axis Bank was the largest issuer. The bank raised INR 20 billion through CD maturing in three-month at 6.07%. Another key issuer was Bank of Baroda which borrowed INR 10 billion through one-year CD at 6.70%. Other issuers were Punjab and Sind Bank, Karur Vysya Bank, and Indian Overseas Bank which cumulatively raised INR 16 billion.

--Primary market

*  No fund raised through CPs

*  Karur Vysya Bank, Axis Bank, Indian Overseas Bank, Punjab and Sind Bank, Bank of Baroda raised funds through CDs

--Secondary market

* Bank of India's CD maturing Wednesday was traded four times at a weighted average yield of 5.2504%

* Reliance Industries's CP maturing Wednesday was traded twice at a weighted average yield of 5.4028%

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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