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Informist, Thursday, Apr. 2, 2026

By Vaishali Tyagi

NEW DELHI – Rates on three-month certificates of deposit slumped Thursday owing to firm demand by mutual funds due to inflows and comfortable liquidity in the banking system, dealers said. Surplus funds with mutual funds, which are major investors in short-term debt paper, kept the market active, traders said. 

"Liquid funds are seeing inflows in April. Therefore, there is good demand for liquid assets like three-month CDs," a dealer at a brokerage firm said. 

"Short-term debt market rates are easing, especially three-month CDs as liquidity improved," a dealer at a brokerage firm said. "The tight liquidity would ease off as it is a new quarter and we expect rates to fall at least 50 basis points from current levels."

In the secondary market, rates on three-month CDs slumped to 6.52-6.55% Thursday from 7.60-7.70% Monday, dealers said, due to robust investor demand. Rates on six-month CDs fell to 7.25-7.30% from 7.38-42% Monday. Rates on one-year CDs remained broadly unchanged at 7.25-7.30%. 

The net liquidity absorbed by the RBI, a proxy for liquidity surplus in the system, was INR 1.85 trillion Wednesday, lower than INR 3.09 trillion Tuesday. Liquidity surplus fell as banks' cash balances with the RBI for the fortnight ending Apr. 15 rose sharply to INR 8.99 trillion Wednesday from INR 7.60 trillion Tuesday.

Dealers expect short-term debt market rates to decline even further, with certificate of deposit rates likely to drop at least 50 basis points from current levels. "CD levels in the secondary market are still higher," a dealer at a state-owned bank said. "Monday onwards, we can expect rates to fall at least by 50 bps (basis points), and the one-year CD rate is likely to fall to 6.70-6.90%, and the three-month CD rates are expected to be around 6.50%. The inverted position should be corrected now." 

After the rate-cut cycle and before the outbreak of war, one-year CD rates were around 5.80%, the dealer quoted above said. "... and we cannot expect these levels now as global cues indicate a rate hike cycle. Brent crude is also rising to new highs every week, which is adding to inflation pressure. Domestic conditions will also add to rising inflation as commodity prices are expected to rise. Given current economic conditions, rates on one-year CDs can fall most to 6.70-6.90% levels... and, I expect RBI to change stance and in the next two to three MPC (Monetary Policy Committee) meetings we can see repo rate at 5.50%.

Rates on commercial paper also fell owing to strong investor demand. Rates on three-month CP issued by non-banking finance companies fell to 7.55-7.60% from 7.70-7.85% Monday. In the CP market, total issuances were slightly over INR 6 billion, according to data available on the Clearing Corp. of India F-TRAC platform at 2036 IST. Out of the total, Tata Realty and Infrastructure raised INR 4.65 billion through CP maturing on Jun. 19 at 6.90%. Other issuers were Trust Investment Advisors, Paisalo Digital and Standard Chartered Securities.

Trading volume in the secondary market of CDs was INR 100.30 billion Thursday, down from INR 147.45 billion Monday. The traded volume of CPs rose to INR 26.25 billion from INR 16.25 billion Monday.

--Primary market

* No funds were raised via CDs.

* Tata Realty and Infrastructure, Trust Investment Advisors, Paisalo Digital, and Standard Chartered Securities India via CPs.

--Secondary market

* Small Industries Development Bank of India's CD maturing on May 5 was traded twice at a weighted average yield of 6.6999%

* HDFC Securities's CP maturing Tuesday was traded once at a weighted average yield of 6.5028%

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 Saji George Titus

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