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Informist, Wednesday, Sept. 2, 2026

 

By Vaishali Tyagi

 

NEW DELHI – Fundraising through short-term debt instruments picked up sharply after a significant fall in yields, dealers said. Yields on certificates of deposit and commercial papers fell 20–25 basis points in the three-month segment Wednesday, with trades concentrated in the up-to-three-month segment. Mutual funds and other investors were most active in the three-month segment, they said.

 

The recent softening in rates, especially up to three months, has been driven by abundant liquidity in the banking system on account of foreign currency non-resident (banks) inflows, dealers said. While these flows are expected to run off in the next two-to-three months, they have pushed three-month debt instrument rates lower. Rates for tenures beyond three months have eased 15-20 bps. 

 

The three-month segment has come off sharply, but further fall has been capped by overhanging expectations of a rate hike, dealers said. "The impact of FCNR(B) inflows is still playing out, with the system yet to fully stabilise after the liquidity surge," a dealer at a brokerage firm said. "At the same time, expectations of a rate hike are beginning to get priced in, keeping short-term rates under pressure."

 

The net liquidity absorbed by the Reserve Bank of India — a proxy for liquidity surplus — hit INR 7.76 trillion Tuesday, from INR 6.65 trillion Monday. The Reserve Bank of India's measures to boost foreign capital inflows have attracted $136.38 billion from Jun. 8 till Monday, the central bank said Wednesday.

 

Banks borrowed INR 91.10 billion through certificates of deposit on Wednesday, significantly higher from INR 7 billion Tuesday, according to Clearing Corp. of India Ltd data. Bank of India raised INR 25.25 billion through a 91-day CD at a weighted average yield of 6.18% while Canara Bank raised INR 20.85 billion through the same maturity CD at a yield of 6.05%. Other two issuers included Karur Vysya Bank and Small Industries Development Bank of India, which raised INR 5 billion and INR 40 billion, respectively. 

 

Yields on the "AAA"-rated three-month CD were at 6.10-6.20% Wednesday, sharply down from 6.40-6.47% Tuesday. Six-month CD were down at 6.45-6.65% from 6.80-6.85%, while yields on one-year CD was at 6.95% from 7.05% on the previous day. 

 

In the commercial paper market, primary issuances surged to INR 242.81 billion Wednesday from INR 43.03 billion Tuesday, according to CCIL data. Several major non-banking financial companies, oil marketing companies, and broking firms tapped the market to borrow money to reap the benefit of a fall in yields. Hindustan Petroleum Corp. raised INR 19.25 billion via 26-day CP at 6.27%, while SIDBI raised INR 60 billion at a yield of 6.43%. Other major issuers were National Bank for Agriculture and Rural Development. Other key issuers included Reliance Retail Ventures, ICICI Securities, DSP Finance, Axis Securities, and Kotak Securities. 

 

Yields on the "AAA"-rated three-month CP issued by a non-banking financial company were at 6.75-6.80% Wednesday, down from 7.00% Tuesday. Six-month CP was down at 7.15-7.20%, below 7.30% Tuesday. 

 

With festive-season demand and strong credit growth adding to funding requirements, banks that have not seen meaningful FCNR(B) inflows may still need to tap the short-term debt market to meet funding needs, dealers said. Large regular issuers in the CD market have stayed away due to FCNR flows and excess liquidity, but are expected to return once the credit cycle picks up.

 

In the secondary market, volume in the CD market grew to INR 111.55 Wednesday from INR 91.45 Tuesday, while volume in the CP market surged to INR 151.10 billion from INR 96.95 billion.

 

--Primary market

* Bank of India, Canara Bank, Karur Vysya Bank and Small Industries Development Bank of India issued CD Wednesday. 

* Hindustan Petroleum Corp., SIDBI, NABARD, Reliance Retail Ventures, ICICI Securities, DSP Finance, Axis Securities, and Kotak Securities were among the key CP issuers Wednesday.

 

--Secondary market

* Federal Bank's CD maturing Thursday was traded three times at a weighted average yield of 5.03%.
* Export-Import Bank of India' CP maturing Thursday was traded eight times at a weighted average yield of 5.02%.

 

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
Wednesday	Tuesday	Wednesday	Tuesday
111.55	91.45	151.10	96.95

 

End

 

US$1 = INR 94.97

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

 

Edited by Deepshikha Bhardwaj

 

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