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Informist, Friday, Jan. 2, 2026

 

By J. Navya Sruthi

 

MUMBAI – Rates on six-month certificates of deposits and three-month commercial papers Friday were up from the previous day, dealers said. However, rates on other short-term debt instruments were largely steady from the previous day due to bleak trading activity. 

 

Rates on six-month CDs rose to 6.40-6.45% Friday from 6.30-6.35% Thursday. "Specific mutual funds were selling due to redemption pressure and with very few borrowers in the market, rates rose from yesterday (Thursday)," a dealer at a state-owned bank said. Indicative rates on three-month and one-year CDs were largely steady from the previous day at 6.02-6.05% and 6.65-6.70%, respectively, Friday.

 

On the other hand, the rate on the benchmark three-month CPs was at 6.46% Friday, up from 6.40% Thursday, due to poor demand for the instrument. "There was noone on buying side at 6.40% and we expected that it may go beyond 6.46%, but it (deal) happened at this level (6.46%)," the dealer said. Indicative rates on three-month papers issued by manufacturing companies were at 6.05-6.07% Friday, unchanged from the previous day.  

 

The secondary market volume in the CP market was largely steady from the previous day at INR 12.50 billion Friday. There were only a couple of CP issuances in the primary market Friday. Kotak Securities and Godrej Industries raised INR 500 million at 6.40% and INR 1.5 billion at 6.46%, respectively. Both these papers will mature in March.

 

Dealers said the holidays this week have kept investors away from the market. However, as the systemic liquidity surplus improved and will continue to improve due to the Reserve Bank of India's liquidity injection measures, volume and issuances of short-term debt papers are seen increasing in the coming days.

 

The net liquidity absorbed from the banking system by the RBI – a proxy for the liquidity surplus – was INR 238.65 billion Thursday, higher than INR 173.35 billion Wednesday. Also, cash balances with the RBI were higher by INR 760 billion Thursday from INR 7.19 trillion Wednesday. The cash balances with RBI as of Thursday were at INR 7.95 trillion, around INR 470 billion higher than the requirement of INR 7.48 trillion for the fortnight ending Jan. 15. 

 

On the CDs side, there were no issuances in the primary market and volume in the secondary market was INR 47.40 billion Friday, significantly down from INR 81.55 billion on Thursday. "Usually after quarter-end there will be reviews and meetings; and market is also in holiday mode, so we didn't see any issuances in primary market. Even we thought of raising (funds) at 6.70% but at those rates, there was no deal at these levels," a dealer at a private-sector bank said.

 

"Volume in primary market and secondary market will pick up next week onwards because of RBI's OMO and swap auctions," the dealer above said. The central bank has already bought gilts worth INR 1.5 trillion in December and will infuse another INR 1.5 trillion of durable liquidity through OMO auctions in January. The central bank conducted a three-year dollar-rupee buy-sell swap worth $5 billion on Dec. 16 and has scheduled another $10 billion auction for Jan. 13.  

 

The dealer at the private sector bank also said there is a deposit crunch in the banking system which leaves the banks with only the option to raise funds through CDs to meet the credit disbursements. "Even major banks which are offering 7% on high-value deposits are also not seeing incremental growth in deposits, which leave them with no option but CDs," the dealer said.  

Following were the volumes, in INR billion, in the secondary market for short-term debt at 1814 IST, as detailed by the Clearing Corp. of India's F-TRAC platform:

 

Certificates of deposit		Commercial paper
Friday	Thursday	Friday	Thursday
47.40	81.55	12.50	12.00

 

End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Tanima Banerjee

 

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