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Informist, Tuesday, Aug. 4, 2026

 

By Nandini Sinha

 

MUMBAI - Banks' issuance of certificates of deposit fell sharply in July as they mobilised funds through Foreign Currency Non-Resident (Bank) deposits, market participants said. Firm yields amid the fragile truce between the US and Iran weighed on commercial paper issuance during the month, they said.

 

Continuing a seven-year trend, CD issuance fell on-month in July as banks had stepped up borrowing in June to meet quarter-end funding needs. CDs worth INR 959.45 billion were issued in July, down from INR 1.80 trillion in June.

 

Apart from the usual seasonal decline in July issuance, inflows through FCNR(B) deposits, higher yields, and the absence of sizeable redemptions also weighed on CD issuance, dealers said. CDs worth INR 627 billion were due for redemption in July, less than half of the INR 1.67 trillion worth due in June.

 

Public sector banks borrowed INR 676.45 billion through CDs in July, down 36% from INR 1.05 trillion in June. Union Bank of India was the largest borrower, issuing CDs worth INR 303.8 billion, followed by Punjab National Bank, which raised INR 129.25 billion.

 

Private sector banks raised INR 267.75 billion through CDs in July, with borrowings down nearly 62% on month. Among private sector lenders, HDFC Bank was the largest borrower at INR 160.25 billion, followed by IDFC FIRST Bank and Jammu and Kashmir Bank.

 

Outstanding FCNR(B) deposits rose by $28 billion between Jun. 5 and Thursday to $60.55 billion, according to a written reply by Minister of State for Finance Pankaj Chaudhary in the Lok Sabha. State-owned banks' FCNR(B) deposits increased by $8.84 billion during the period to $25.59 billion, while those of private-sector banks rose by $10.73 billion to $25.68 billion.

 

However, yields on short-term debt papers rose in July after falling at least 80 basis points in June, tracking Brent crude oil prices amid the fragile truce between the US and Iran. Brent crude climbed above $85 per barrel in July after falling to its pre-war level of $71.38 per barrel in June.

 

The yields on 'AAA'-rated three-month CDs rose nearly 80 bps on month to 6.85-6.90% at the end of July. Yields on six-month CDs rose around 30 bps to 6.90-6.95%, while those on one-year 'AAA'-rated CDs increased around 20 bps to 7.15-7.20%.

 

Borrowers preferred papers maturing within three months to refinance upcoming redemptions and navigate uncertainty surrounding the US-Iran conflict, market participants said. Banks borrowed INR 712.95 billion through CDs maturing between August and October. Longer-tenor CDs maturing between November and June 2027 aggregated INR 246.5 billion.

 

Elevated corporate bond yields are prompting borrowers to tap the short-term debt market until there is greater clarity on the US-Iran conflict, Venkatakrishnan Srinivasan, managing partner at Rockfort Fincap, said. When borrowers needed money, they came to the short-term debt because pricing there was much better than working capital loans, he said. "But the only problem I always worry about is how much time they are going to consistently rotate in place of long-term requirements. ALM (asset and liability management) requirements are not matching," Srinivasan said.

 

Similarly, CP issuances maturing up to October aggregated to INR 1.07 trillion, while those maturing between November and July 2027 aggregated to INR 148.47 billion.

 

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CP issuance aggregated INR 1.22 trillion in July, down 52% from INR 2.55 trillion in June. Higher crude oil prices pushed yields sharply higher, discouraging borrowers from tapping the short-term debt market, dealers said. Yields on 'AAA'-rated three-month CPs issued by non-banking finance companies were at 7.20-7.25% at the end of July, up around 50 bps on month.

 

Non-banking financial companies raised INR 302.75 billion through CPs in July, compared with INR 397.96 billion in June. Bajaj Finance raised INR 55.25 billion through CPs, while L&T Finance raised INR 54 billion. Borrowings by brokerages fell sharply to INR 179.61 billion from INR 546.22 billion in June.

 

Borrowings by public sector undertakings through CPs fell to INR 259.25 billion in July from INR 680.65 billion in June. Of this, oil marketing companies accounted for INR 202 billion. However, fundraising by OMCs through commercial papers rose 34% on month despite the overall decline in issuance.

 

With market participants not expecting the Reserve Bank of India to raise interest rates in August, dealers expect CD and CP issuance to recover this month. However, expectations of FCNR(B) inflows of at least $80 billion by the end of September could continue to weigh on CD issuance. Surplus liquidity, which stood at INR 2.44 trillion on Monday, is expected to widen further to around INR 4 trillion in August.

 

The following are details of CD and CP issuances in July, as per data from the Clearing Corp. of India, in INR billion:

 

CP	Jul-26	Jun-26	On month%	Jul-25	On year%
Non-banking finance companies	302.75	397.96	(-)23.92	704.82	(-)43.53
Manufacturing	87.36	114.82	(-)23.91	745.07	(-)84.58
Brokerages	179.61	546.22	(-)67.11	--	--
PSUs	259.25	680.65	(-)61.91	--	--
Others	386.82	809.4	(-)52.20	--	--
Total	1215.79	2549.05	(-)52.30	1533.39	66.23

 

 

CD	Jul-26	Jun-26	On month%	Jul-25	On year%
State-owned banks	676.45	1055.4	(-)35.90	234.75	188.15
Private banks	267.75	702.85	(-)61.90	175.1	52.91
Others	1.25	15.8	(-)92.08	21	(-)94.04
Foreign Banks	14	27.5	(-)49.09	6.6	112.12
TOTAL	959.45	1801.55	(-)46.74	437.45	119.32

 

End
 

Edited by Saji George Titus

 

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