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Informist, Wednesday, Mar. 18, 2026

By J. Navya Sruthi

MUMBAI – Rates on one-year certificates of deposit rose for the second consecutive day Wednesday as mutual funds were buying, dealers said. However, rates on three-month CDs and commercial papers rose due to more supply in this segment, dealers said.  

In the secondary market, rates on one-year CDs fell to 7.10% from 7.15-7.20% Tuesday. However, rates on three-month CDs were up at 7.30% from 7.25-7.30% Tuesday On the commercial paper side, indicative rates for three-month CPs issued by non-banking finance companies rose to 7.35% from 7.30%.

Mutual funds were buying one-year CDs to add to their portfolios as they were churning up their portfolios, dealers said. "Rates in three-month (segment) were up as TREPs (tri-party repo rate) were also up today (Wednesday)," a dealer at a private sector bank said.  

The tri-party repo rate ended at 5.50% Wednesday, the highest since Jan. 28, and the two-day interbank call rate closed at 5.40%, the highest since Jan. 29. The weighted average rate in the tri-party repo market was at 5.17% Wednesday, significantly up from 5.04% Tuesday.     

Dealers said rates are likely to rise further by five to 10 basis points next week due to the liquidity crunch in the banking system. The net liquidity absorbed by the RBI from the banking system -- a proxy for systemic liquidity surplus -- was INR 819.64 billion Tuesday, lower than the comfortable INR-1-trillion level, but up from INR 754.84 billion Monday.

Even though the Reserve Bank of India Tuesday conducted a seven-day variable rate repo auction and poor subscription at the auction, dealers were expecting the central bank to announce another VRR to support banking system's liquidity. "Banks do not want to lock in 5.26% for seven days with RBI. We were expecting a shorter tenure VRR like two-day or three-day," the dealer said.  

The RBI on Wednesday announced a three-day VRR auction for INR 750 billion to support the system's liquidity due to INR 1.5 trillion to INR 2 trillion outflows for goods and services tax payments. The auction will be conducted between 0930 IST and 1000 IST Friday.  

"Once GST outflows are done, we will have inflows through government's spending. Cash balances are also high that we can expect inflows this month," a dealer at a state-owned bank said. This is likely to keep rates on short-term debt papers steady. 

--Secondary market

* Canara Bank's CD maturing Friday was traded eight times at a weighted average yield of 5.2493%

* Small Industries Development Bank of India's CP maturing Friday was traded 14 times at a weighted average yield of 5.2317%

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

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

Edited by Deepshikha Bhardwaj

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