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Informist, Tuesday, Mar. 24, 2026

By Vaishali Tyagi, Nandini Sinha, and Meera Nair

MUMBAI/NEW DELHI – Rates on certificates of deposit and commercial papers ended higher Tuesday because of subdued investor appetite, dealers said. Month-end redemption pressure on mutual funds, which are major investors in the market, kept them away from the primary market.

"Rates will continue to be higher because of supply-demand mismatch," a dealer at a private bank said. "VRR (Variable Repo Rate) is of course helping banking system liquidity but rates will likely be higher due to redemption pressure and selling by MFs. As of now, not expecting a VRR but RBI (the Reserve Bank of India) will act accordingly as the situation evolves."

Liquidity in the banking system turned into a surplus Monday due to early government spending and maturity of oil bonds. The net liquidity absorbed by the RBI, a proxy for liquidity surplus, was at INR 261.96 billion compared with a deficit of INR 653.96 billion Sunday.

In the secondary market, rates on three-month CDs rose to 7.45-7.55% from 7.40-7.45% Monday, while those on six-month CDs were up at 7.45-7.50% from 7.40-7.50% the previous day. Rates on one-year CDs rose to 7.30% from 7.25%. Indicative rates on three-month CPs issued by non-banking finance companies rose to 7.70-7.75% Tuesday.

Dealer said apart from redemption pressure selling was also due to uncertainity in the market led by West Asia tension. "Mostly there was uncertainty..so most of the institutions were selling," a dealer at a brokerage firm said.

Higher borrowing costs have impacted borrowing plans of non-banking financial companies and these are struggling to raise funds at affordable rates, dealers said. "The rise in cost of borrowing has already impacted fundraising plans and will continue to impact low rated NBFCs...they are facing challenges as they are not able to borrow capital at fine levels," a dealer at a private bank said. 

Low-rated NBFCs' fundraising in the last quarter of this financial year was lower compared with the same quarter last year, dealers said. "This year's Q4 (Jan-Mar) saw fewer issuances from low-rated NBFCs compared to high-rated ones like LIC (Life Insurance Corp.)... because they are managing to raise funds, but at a higher cost through NCDs (non-convertible debentures)," the dealer quoted above said. "If yields reverse, things might improve, and pressure will ease."

In primary market of commercial paper, Power Finance Corp. and Bajaj Finance raised funds along with a few non-banking financial companies. On the certificate of deposit side, Axis Bank raised INR 35 billion through a three-month certificate of deposit maturing on Jun. 24, 2026, at 7.60%. Punjab National Bank, HDFC Bank, and Canara Bank also raised funds through CDs.

Trading volume in the secondary market of CDs was INR 103.00 billion Tuesday, lower from INR 124.85 billion Monday. The traded volume of CPs rose to INR 43.50 billion from INR 16.30 billion Monday.

--Primary market

* Axis Bank, Punjab National Bank, HDFC Bank and Canara Bank raised funds via CDs.

* Power Finance Corp. and Bajaj Finance raised funds via CPs.

--Secondary market

* Indian Bank's CD maturing Wednesday was traded thrice at a weighted average yield of 5.1890%

* Tata Communications's CP maturing Wednesday was twice at a weighted average yield of 5.3298%

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

Edited by Akul Nishant Akhoury

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