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Informist, Friday, Jul. 3, 2026

 

By Meera Nair

 

MUMBAI – Yields on certificates of deposit rose across short- and mid-term tenures Friday as banks resumed borrowing at the start of the new quarter, while commercial paper rates were largely steady amid limited trading, dealers said.

 

The rise in CD yields came despite surplus banking system liquidity, as fresh supply from banks prompted investors to demand slightly higher rates. Dealers, however, said liquidity conditions remain comfortable and are likely to improve further as foreign currency non-resident (bank) deposit inflows begin over the next few weeks.

 

The Reserve Bank of India net absorbed INR 994.72 billion through its liquidity adjustment facility on Thursday, up from INR 864.69 billion a day earlier, indicating a higher liquidity surplus in the banking system. The increase came as banks reduced their cash balances with the RBI to INR 8.64 trillion from INR 8.78 trillion on Wednesday.

 

"FCNR(B) deposits will start coming in by next week and liquidity should improve. The current level is nothing to worry about," a dealer at a private-sector bank said.

 

Three-month AAA-rated CD yields rose 10 basis points to 6.20-6.25% from 6.10-6.15% on Thursday. Six-month yields increased about 5 bps to 6.50-6.57% from 6.45-6.50%. Activity was concentrated in one-year CDs, with yields broadly steady at 6.87-6.95%, compared with 6.90-6.95% on Thursday, as investors continued to favour the longer tenure. "Mutual funds' participation has kept the CD market active today, and they are also expecting more corporate inflows," the dealer said.

 

In the commercial paper market, three-month AAA-rated papers issued by non-banking finance companies edged up in the lower end of the range to 6.65-6.70% from 6.60-6.70% on Thursday. There were no trades in the six-month and one-year segments.

 

Trading volumes reflected stronger activity. CD turnover rose significantly to INR 117.90 billion as of 1721 IST from INR 61.85 billion on Thursday, according to Clearing Corp. of India Ltd. data. CP trading volume also increased to INR 50.75 billion from INR 40.12 billion.

 

Dealers expect money market rates to soften once FCNR(B) inflows gather pace. "We expect rates to cool over the next couple of weeks, with yields likely to decline by around 10 basis points as the liquidity impact starts reflecting in the market," the dealer said.

 

In the primary market, Canara Bank, Central Bank of India, IDBI Bank, and Indian Bank were the only CD issuers on Friday, raising a combined INR 33.75 billion. Canara Bank raised INR 21.25 billion through a 357-day CD at a weighted average yield of 6.87%, while IDBI Bank and Indian Bank raised INR 5 billion and INR 1 billion, respectively, through short-term CDs each at a weighted average yield of 6.21%. Central Bank of India raised INR 6.50 billion at 6.18%. 

 

Commercial paper issuance rose to INR 61.02 billion, compared with INR 29.74 billion on Thursday, as more issuers tapped the market after the start of the new quarter. Issuers included National Bank for Agriculture and Rural Development, Chennai Petroleum Corp. Ltd., Grasim Industries, L&T Finance, Manappuram Finance, and Redington Ltd. Among the major issuers, NABARD raised INR 25.00 billion through 90-day papers at a weighted average yield of 6.47%, while Chennai Petroleum Corp. Ltd. raised INR 10.00 billion through 27-day papers at 6.10%. Grasim Industries raised INR 5.00 billion through 46-day CPs at 6.15%, and L&T Finance raised INR 3.00 billion through 342-day papers at 7.39%. 
 

Dealers expect primary market activity to gather pace after the first week of July as more issuers return following the beginning of the new quarter. 

 

--Primary market
* Indian Bank, IDBI Bank, Central Bank of India, and Canara Bank were the only issuers in CD Friday.   

* NABARD, Chennai Petroleum Corp. Ltd., Grasim Industries, L&T Finance, Manappuram Finance, and Redington Ltd. were the major issuers of CPs Friday.

 

--Secondary market

* Indian Bank's CD maturing Monday was traded three times at a weighted average yield of 5.15%
* Godrej Consumer Products Ltd.'s CP maturing Monday was traded once at a weighted average yield of 5.15%

 

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 paper
Friday	Thursday	Friday	Thursday
117.90	61.85	50.75	40.12

 

End

 

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

 

Edited by Deepshikha Bhardwaj

 

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