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Informist, Friday, Jan. 16, 2026

By Vaishali Tyagi

NEW DELHI – Elevated borrowing rates kept most issuers on the sidelines in the short-term debt market Friday, dealers said. Redemption needs refrained mutual funds from actively investing in the debt instrument, which resulted in higher borrowing rates, they said.

Apart from it, low banking system liquidity and limited flows to mutual funds are also dampening investor appetite, limiting participation, they said. The net liquidity absorbed from the banking system by the RBI – a proxy for the liquidity surplus – was INR 1.09 trillion Thursday, up from INR 764.38 billion Wednesday. "Apart from liquidity pressure, supply is continuing steadily and MF (mutual funds) flows are also not very high," a dealer at a brokerage firm said.

Borrowing costs on three-month certificates of deposit rose to 6.75-6.85% Friday, higher from 6.69-6.73% Wednesday. Rates on six-month CDs surged further to 6.90-7.00% from 6.83-6.90% Wednesday, while rates on one-year CDs rose to 6.97-7.05% Friday from 6.86-6.97%.

Market participants said most issuers are abstaining from tapping the market as they were uncomfortable with current high rates and rates are rising everyday. "Some fund houses (mutual funds houses) have low cash with them and they are waiting for right opportunity to invest which limits participation and which is resulting in higher rates," a dealer at a brokerage said. 

On Friday, there was single certificates of deposit issuance. The total fundraising through CD fell to INR 6.50 billion Friday from INR 25.50 billion Wednesday. Union Bank of India raised INR 6.5 billion through three-month CD at 6.85%. Contrary to the lack of activity in the primary market, trading volume picked up in the secondary market as mutual funds rushed to liquidate papers to meet their redemption needs, dealers said. The turnover in the secondary CD market rose to INR 92.45 billion Friday from INR 58.45 billion Wednesday.

Similarly, fundraising through commercial papers stood at INR 5 billion Friday from INR 13.50 billion Wednesday. Bajaj Finance Securities was only CP issuer, raising INR 5 billion via a March-maturity CP at 6.75%. Rates on three-month papers issued by non-banking financial companies were at 6.78-6.92% Friday, one-to-two basis points up from Wednesday's 6.78-6.90%. Activity in secondary market of CP remained dull. Volume in the secondary market was at INR 27.50 billion, up from INR 40.25 billion Wednesday. 

--Primary market

* Bajaj Finance Securities raised funds through CPs

* Union Bank raised funds through CDs

--Secondary market

* Indian Bank's CD maturing Monday was traded thrice at a weighted average yield of 5.2948%

* Birla Group Holdings' CP maturing Monday was traded once at a weighted average yield of 5.5018%

The 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

Reported by Vaishali Tyagi

Edited by Akul Nishant Akhoury

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