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Informist, Wednesday, Jun. 17, 2026

 

By Meera Nair

 

MUMBAI – Yields on certificates of deposit and commercial papers rose in most tenors on Wednesday due to liquidity crunch in the banking system, driven by tax outflows and goods and services tax payments, dealers said. The three-month CD and CPs were the most active in the secondary market as supply was more in these segments. 

 

The net liquidity absorbed by the RBI was INR 238.81 billion Tuesday, sharply lower than INR 1.51 trillion Monday, according to the latest release. Liquidity surplus in the banking system likely fell due to advance tax outflows. "There is nothing to worry seeing the current liquidity level... government spending, VRRs (variable rate repo) and it (liquidity) will be back to the comfortable position soon," a dealer at a public-sector bank said.

 

In the secondary market, yields on AAA-rated CDs rose 5-15 basis points in the three-month and one-year segments, while remaining largely unchanged in the six-month tenor. Yield on the three-month CDs rose five bps to 6.60-6.65% from 6.55-6.60% Tuesday. Six-month yields were marginally up at 7.20-7.25%, from 7.18-7.20% Tuesday, while one-year yields rose 15 bps to 7.30-35% from 7.15-7.20% Tuesday.

 

"When liquidity levels change - whether it's sufficient (surplus) or in deficit - the segment that gets hit first is the three-month segment, rather than six-month or one-year, because more supply happens in the short-end papers," the dealer at the public-sector bank said. He also said, the six-month segment is usually least preferred by mutual funds as rallies in other tenors attract more investment interest.

 

Yields on AAA-rated CPs issued by non-banking financial companies rose in three-month and six-month segments, while it fell by 5 bps in one-year segment. The yield on three-month CPs rose 35 bps to 6.95-7.00% from 6.60-6.65% Tuesday, while six-month segment rose 5 bps to 7.50-7.55% from 7.45-7.50% Tuesday. The one-year segment fell to 7.65–7.70% from 7.70-7.75%. 

 

Dealers said one-year CPs have seen falling yields even as rates in the rest of the CP curve have risen. The longer-tenor CP segment typically sees less activity and lower supply since demand mostly comes from corporates. However, mutual funds have now started showing interest, which is adding activity and has pulled one-year yields lower.

 

"The one-year segment is the least issued and traded segment as corporates are the buyers in that segment...but mutual funds have recently stepped into that segment so we can see some activity soon," a dealer at a brokerage firm said. 

 

CD issuances fell sharply to INR 113.50 billion as of 1742 IST from INR 167.25 billion on Tuesday, according to data from the Clearing Corp of India Ltd. Union Bank of India, ICICI Bank, Bandhan Bank, Bank of India, HDFC Bank, Karur Vysya Bank, Equitas Small Finance Bank, and Punjab National Bank were among those that tapped the primary market for funds.

 

Punjab National Bank raised INR 23.75 billion through three-month CDs at 6.56%, while Union Bank of India raised INR 15.25 billion through one-month CD at a weighted average yield of 6.20%. ICICI Bank raised INR 24 billion through two separate CD, while Bandhan Bank raised INR 1.5 billion through 165-day CDs at 7.65%.

 

CP issuances fell significantly to INR 86.47 billion as of 1747 IST from INR 160.92 billion on Tuesday. Issuers included Kotak Securities, National Bank for Agriculture and Rural Development, SBICAP Securities, Manappuram Finance, Muthoot Fincorp, Tata Housing Development Co. Ltd., and L&T Finance. 

 

Kotak Securities raised INR 7.5 billion through 91-day CPs at a weighted average yield of 7.35%, while NABARD raised INR 5 billion at 6.55%, according to CCIL data. SBICAP Securities raised INR 4 billion at 7.62%, while Manappuram Finance and Muthoot Fincorp raised INR 2.5 billion each at 7.81% and 8.45% through CPs maturing in 90- and 91-day, respectively.

 

In the secondary market Tuesday, CD trading volume fell to INR 141.60 billion from INR 215.85 billion on Tuesday, according to CCIL data. CP trading volume also declined sharply to INR 57.20 billion from INR 106.80 billion. Volumes slipped as mutual funds stayed away due to redemption pressure, while corporates were also less active because of tax outflows and salary payments, dealers said. 

 

--Primary market
* Union Bank of India, ICICI Bank, Bandhan Bank, Bank of India, HDFC Bank, Punjab National Bank were among other CD issuers. 

* Kotak Securities, NABARD, SBICAP Securities, Manappuram Finance, Muthoot Fincorp, Tata Housing Development Co. Ltd., and L&T Finance were among other CP issuers. 

 

--Secondary market

* Ujjivan Small Finance Bank's CD maturing Thursday was traded once at a weighted average yield of 5.99%
* L&T Metro Rail Hyderabad CP maturing Thursday was traded once at a weighted average yield of 5.40%

 

The following were the volumes, in INR billion, in the secondary market for short-term debt at 1811 IST, as detailed on CCIL's F-TRAC platform:

 

Certificates of deposit		Commercial paper
Wednesday	Tuesday	Wednesday	Tuesday
141.60	215.85	57.20	106.80

 

End

 

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

 

Edited by Deepshikha Bhardwaj

 

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