Commercial Paper issuances down 66 percent in October as yields harden

Commercial papers

Issuances of the commercial papers (CP) during October fell sharply by 66 percent over previous month amid hardening of yields on these instruments, though on a year-on-year basis the issuances have seen a 25 percent rise, data from the Clearing Corporation of India (CCIL) showed.

CP issuances stood at Rs 58,622.20 crore till October 26, as compared to Rs 1.69 lakh crore in September and Rs 37,043.45 crore in October 2024.

Preference for Money and Bond Market

The trend in October is different from what was seen in the recent months, when most corporates were tapping the bond and money market to raise funds due to cheaper borrowing cost compared to banks.

Corporates had been preferring bond market to raise funds after the Reserve Bank of India (RBI) initiated a rate-cutting cycle in February 2025, reducing the repo rate by 100 bps this year. In response, yields on corporate bonds and commercial papers (CPs) fell by more than 70 bps, making market borrowing significantly cheaper compared to traditional bank credit.

Hardening Yields

Yield on these CPs have now hardened by 15-17 bps amid fluctuation in the systemic liquidity in the banking system. The strain on liquidity has come after the goods and services tax outflows from the banking system and increase in currency in circulation amid festive season, according to experts.

Currency in circulation usually surges during the festive season, resulting in lowering liquidity in the banking system, added money market experts.

According to the Reserve Bank of India (RBI) data, liquidity started turning deficit from October 20, the Diwali day, and the cash shortfall persisted till October 23.

The liquidity deficit stood at Rs 70,169.79 crore on October 20, Rs 61,647.79 crore on October 21, Rs 52,299.79 crore the next day and fell to Rs 2,645.79 crore on October 23. The system had a surplus cash of Rs 46,446.21 crore on October 19.

Commercial Papers up for Maturity

According to the India Ratings report, CP maturing in October, November and December 2025 amount to Rs 0.68 lakh crore, Rs 0.93 lakh crore and Rs 1.23 lakh crore respectively, as of October 7, 2025.

Out of the aggregate amount of Rs 2.84 lakh crore of CPs maturing over this period, those by corporates amounted to Rs 1.02 lakh crore (36 percent), non-banks Rs 1.24 lakh crore (43 percent), public finance entities Rs 0.36 lakh crore (13 percent) and public entities Rs 0.23 lakh crore (8 percent).