Short-Term Debt
3-month CD yields fall 15 basis points, other rates steady
This story was originally published at 18:52 IST on 27 August 2026
Register to read our real-time news.Informist, Thursday, Aug. 27, 2026
By Meera Nair
MUMBAI – Yields on three-month certificates of deposit fell 15 basis points Thursday as mutual funds continued to buy short-term papers, dealers said. However, most other rates, including yields on commercial papers, remained steady, they said.
Yields on AAA-rated three-month CDs fell 15 bps to 6.35-6.40% from 6.50-6.55% Tuesday. Six-month CD yields were steady at around 6.80-6.83%. There were no trades in the one-year segment. The three-month segment was the most active.
"Even though the three-month CD segment was active, there was less supply as banks are expecting to raise funds at better rates. However, three-month CD rates are likely to rise if the RBI (Reserve Bank of India) introduces incremental CRR (cash reserve ratio) to tighten core liquidity," a dealer at a public-sector bank said.
Thursday, Business Standard reported that the RBI may tighten liquidity by imposing an incremental CRR before resorting to a repo rate hike. Incremental CRR would require banks to keep a higher proportion of incremental deposits as cash with the RBI, reducing funds available for lending or investment. This could tighten the surplus liquidity, putting upward pressure on CD yields, dealers said.
In the commercial paper market, yields on three-month CPs issued by AAA-rated non-bank financiers were around 7.10%, while six-month papers were at 6.75-6.80%. There were no trades in the one-year segment. Papers maturing in February-March were more active.
A brokerage dealer said the primary CP market continued to see more issuance, as issuers could sell short-term papers at relatively attractive levels compared with CD issuance costs.
Secondary-market turnover in CDs rose to INR 152.85 billion from INR 118.00 billion Tuesday, according to Clearing Corp. of India Ltd. data. Money markets were shut Wednesday for Id-e-Milad. Primary-market CD issuances fell to INR 14.80 billion from INR 34.45 billion Tuesday. Central Bank of India, Indian Overseas Bank, CSB Bank, and AU Small Finance Bank issued CDs.
Central Bank and Indian Overseas Bank raised INR 5 billion each through 91-day papers at weighted average yields of 6.60% and 6.45%, respectively. AU Small Finance Bank raised INR 4 billion through a 152-day paper at a weighted average yield of 7.15%, while CSB Bank raised INR 800 million through 91-day papers at a weighted average yield of 7.00%.
Secondary-market turnover in certificates of deposit rose sharply Thursday as mutual funds continued to prefer CDs amid surplus liquidity in the system, while banks remained less aggressive, dealers said. Commercial paper secondary market activity also improved, although primary CP issuances declined, they said.
"If core liquidity remains in surplus, there are chances for both CD and CP rates to come down over the next one-two weeks," a dealer at a brokerage firm said.
Secondary-market turnover in CPs rose sharply to INR 88.70 billion from INR 32.00 billion Tuesday. However, primary-market CP issuances fell to INR 122.65 billion as of 1737 IST from INR 149.52 billion Tuesday.
Tata Steel raised a total of INR 22 billion through 29- and 43-day CPs at weighted average yields of 6.50% and 6.67%, respectively. LIC Housing Finance raised INR 20 billion through a 91-day paper at 6.57%. PNB Housing Finance raised INR 7 billion through a 91-day CP at a weighted average yield of 6.75%, while HDB Financial Services raised INR 6.75 billion at a weighted average yield of 7.25%.
"Even today, investors showed more preference for the secondary CD market and primary CP market because of the attractive difference in levels between the two markets," the dealer said.
The preference for secondary CDs and primary CPs reflects the relative pricing between the two markets, with investors finding CDs attractive in the secondary market while issuers continue to find the CP market a competitive source of short-term funding, dealers said.
The net liquidity absorbed by the RBI – a proxy for liquidity surplus – was INR 3.81 trillion Tuesday, up from INR 3.64 trillion Monday.
--Primary market
* Central Bank of India, Indian Overseas Bank, CSB Bank, and AU Small Finance Bank issued CDs Thursday.
* LIC Housing Finance, Tata Steel, PNB Housing Finance, HDB Financial Services, Kotak Mahindra Investments, and Sundaram Finance were among the CP issuers on Thursday.
--Secondary market
* DBS Bank India's CD maturing Monday was traded once at a weighted average yield of 5.75%.
* ICICI Securities' CP maturing Friday was traded once at a weighted average yield of 5.12%.
The following were the volumes, in INR billion, in the secondary market for short-term debt at 1700 IST, as detailed on CCIL's F-TRAC platform:
|
Certificates of deposit |
Commercial papers |
||
| Wednesday | Tuesday | Wednesday | Tuesday |
| 152.85 | 118.00 | 88.70 | 32.00 |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Saji George Titus
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