More Stories

Informist, Thursday, Oct. 1, 2026

 

By Meera Nair

 

MUMBAI – Issuances of certificates of deposit rebounded sharply in September, as banks stepped up borrowing to meet redemption and rollover requirements, manage quarter-end balance sheets, and fund credit growth. Commercial paper issuances surged as companies tapped the short-term debt market for working capital and refinancing needs.

 

Banks issued CDs worth INR 1.11 trillion in September, up nearly 63% on month and 67% on year, according to data from Clearing Corp. of India Ltd., collated by Informist. The sharp rise in CD issuances in September followed a subdued August, when banks had raised just INR 681.30 billion through CDs as strong inflows under the Reserve Bank of India's special FCNR (B) deposit scheme left lenders with ample liquidity and reduced their need for wholesale funding.

 

September also saw a substantial number of CD maturities, which led to the rise in issuances. In September alone, INR 1.83 trillion of CDs were due for redemption, dealers said. "September issuance is a combination of maturities and rollover requirements, quarter-end balance-sheet management and some front-loading of funding, rather than simply a sign of liquidity stress," Imran Khan, director at EquiRize, said.

 

The RBI has since absorbed a significant amount of surplus liquidity through variable rate reverse repo operations, open market operations, and foreign-exchange operations, making wholesale funding more relevant for banks, dealers said.

 

State-owned banks raised INR 569.15 billion through CDs in September, up nearly 88% from August, while private sector banks raised INR 488.75 billion, up nearly 94%. HDFC Bank was the largest issuer, raising INR 305.50 billion, followed by Bank of India at INR 151 billion and Canara Bank at INR 139.90 billion.

 

Banks are also seeing stronger credit demand, with bank credit growing at more than 19% on year in July, while India's economy grew 7.8% in the Apr-Jun quarter, dealers said. Retail and consumption-linked credit is expected to remain important ahead of the festive season, while improving corporate working-capital and capital expenditure demand and funding requirements of non-bank financial companies are also supporting credit growth. Dealers, however, said CD issuances cannot be attributed solely to festive season demand.

 

CD RATES

CD yields have moved higher from the very soft levels seen immediately after the FCNR(B)-driven liquidity surge, particularly at the longer end. At the start of the month, "AAA"-rated three-month CD yields were at 6.40-6.47%, while at the end of the month, they fell to 6.25-6.30%. Six-month yields at the start of the month and at the end were unchanged at 6.80-6.85%, while one-year yields on Sept. 1 was at 7.05%, while on Sept. 30, it surged to 7.40-7.45%.

 

Dealers said investors remain selective and continue to prefer high-quality issuers and attractive carry, while shorter-tenor CDs offer greater flexibility amid uncertainty over the RBI's liquidity operations and interest-rate outlook. "There is still demand for longer-tenor CDs, but investors will want adequate compensation for locking money for six months or a year," Khan  said.

 

Banks are willing to lock in longer-term funding when pricing is attractive, but are also maintaining shorter-tenor borrowing to retain flexibility, dealers said.

 

COMMERCIAL PAPERS

Commercial paper issuance rose 46% on month and nearly 188% on year to INR 2.64 trillion in September, according to Clearing Corp. data. Brokerages were the largest issuers, raising INR 540.64 billion, followed by public sector undertakings at INR 533.90 billion and non-banking financial companies at INR 373.20 billion.

 

Oil marketing companies raised INR 193.25 billion through CPs, while manufacturing companies raised INR 145.29 billion. Among individual issuers, Reliance Retail Ventures raised INR 241.25 billion, followed by ICICI Securities at INR 146.95 billion, and National Bank for Agriculture and Rural Development at INR 113.75 billion.

 

Dealers said the increase in CP issuances was driven mainly by refinancing and working-capital requirements, with quarter-end funding needs and relatively attractive short-term borrowing costs also supporting demand. "September is also a natural quarter-end funding period. Companies want to ensure adequate liquidity around the balance-sheet reporting date," Khan said.

 

NBFCs remain important participants in the CP market as part of their broader liability-management strategy, although dealers said CPs are not a complete substitute for longer-duration funding such as bank loans, bonds and securitisation. CP issuance also remained diversified across sectors, with brokerages, PSUs, NBFCs, oil marketing companies and large corporates all accessing the market during September.

 

CP RATES

Dealers said high-quality CPs continue to attract investors because they offer relatively attractive carry while keeping the duration short. However, investors remain selective and are differentiating between issuers based on credit quality, liquidity and tenor.

In the beginning of September, "AAA"- rated non-banking finance companies' three-month CP yields were at 6.75-6.80%, while at the end of the month, they rose to 7.15-7.20%. Yields on six-month CPs at the start of the month were at 7.15-7.20%, while at the end, they rose to 7.30-7.35%. One-year yields were at 7.15-7.30%, and surged to 7.80-7.85% at the end of the month.

 

ROAD AHEAD

CD issuance is expected to remain reasonably active in October, though the pace will depend on the extent of RBI's liquidity absorption and the pace of credit growth, dealers said. The banking system has moved from extremely abundant liquidity toward a more balanced environment, while credit growth remains strong. RBI has already completed INR 1 trillion of net bond sales in the current financial year, while foreign-exchange operations have also drained rupee liquidity.

 

"October should remain an active CP,CD market, but I would describe it as funding optimisation and pre-funding rather than a liquidity-stress episode," Khan said. "The marginal cost of liquidity matters more than the headline surplus number," he said.

 

CP issuance is also expected to remain healthy in October as NBFCs, manufacturers and other corporates need to meet working-capital and refinancing requirements. Companies may also front-load borrowing ahead of a possible change in the RBI's interest-rate cycle, dealers said. However, they cautioned that higher issuance should not necessarily be interpreted as a sign of liquidity stress, as borrowers may simply be optimising their liability profile while short-term funding remains available.

 

CD	Sep-26	Aug-26	On-month %
State-owned banks	569.15	302.25	88.30
Private banks	488.75	252.35	93.68
Others	9	18	-50.00
PSUs	40	108.7	-63.20
Foreign Banks	3	0	NA
TOTAL	1109.9	681.3	62.91

 

CP	Sep-26	Aug-26	On-month %
NBFC	394.95	525.71	-24.87302886
Manufacturing	254.04	96.85	162.3025297
Brokerages	557.99	376.3	48.28328461
PSUs	727.15	451.75	60.96292197
Others	702.72	354.11	98.44681031
Total	2636.85	1804.72	46.10853761

 

End

 

Edited by Avishek Dutta

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2026. All rights reserved.