RBI rate cut fuels corporate borrowing rush: CP issuances surge 20% in Q1FY26

Corporates

Indian corporates ramped up their short-term fundraising through commercial papers (CPs) in the first quarter of FY26, with issuances jumping nearly 20 percent year-on-year. The surge comes as companies rush to take advantage of lower borrowing costs following the Reserve Bank of India’s (RBI) rate cut.

According to data from the Clearing Corporation of India (CCIL), corporate CP issuances stood at Rs 4.54 lakh crore in Q1FY26, up from Rs 3.81 lakh crore in Q1FY25, rising 20 percent year-on-year. On a sequential basis, fundraising rose by around 4 percent from Rs 4.39 lakh crore in Q4FY25.

The sharp fall in interest rates has made CPs an attractive option for corporates looking to manage working capital and refinance short-term obligations at lower costs. According to market participants, several top-rated firms have turned to the CP market in recent months to lock in favourable yields and reduce reliance on bank credit.

“This increase was primarily driven by higher issuances from non-banking finance companies (NBFCs) and security broking firms, spurred by a decline in CP yields amid improved liquidity conditions and cumulative repo rate cuts of 100 basis points (bps) between February and June 2025,” said Sachin Sachdeva, Vice President, Sector Head - Financial Sector Ratings.

Top issuers

Notably, around 27 percent of the total funds raised in Q1FY26 were raised by just five large corporates: National Bank for Agriculture and Rural Development (NABARD), Indian Oil Corporation, Small Industries Development Bank of India (SIDBI), Reliance Jio Infocomm, and Reliance Retail Ventures.

NABARD topped the list of issuers, raising Rs 32,300 crore in Q1FY26, followed by Indian Oil Corporation at Rs 27,200 crore, SIDBI at Rs 22,100 crore, Reliance Jio Infocomm at Rs 20,200 crore, and Reliance Retail Ventures at Rs 18,700 crore.

Data also revealed that NABARD has consistently maintained its position as the top CP issuer across most quarters and months, underlining its strong presence in the short-term debt market.

Rate cut reduces borrowing cost

According to Sneha Pandey, Fund Manager- Fixed Income, Quantum AMC, 3-month AAA-rated CP, which was trading at 6.40 percent–6.50 percent just a few months back, has dropped to around 5.60 percent–5.70 percent.

“That’s a huge drop, and for corporate treasurers, that’s a green light to start raising money through CPs rather than taking costlier bank loans, ” Pandey added.

This was after the RBI reduced the repo rate by cumulatively 100 bps, with 25 bps each in February and April, and 50 bps in June monetary policy.

Bond and money market rates typically react more quickly to RBI's rate actions than bank lending rates. This often prompts investors to shift toward short-term instruments like CPs or opt for long-term funding through non-convertible debentures (NCDs).

Helps corporates to manage borrowing mix

Money market experts said that borrowing through CPs allows borrowers to manage their funding mix in several ways, such as cost optimisation, allowing to replace more expensive short-term bank credit with cheaper CPs, diversification of funding sources, and flexibility in tenure to match the outflows.

Pandey added that CPs come with flexible tenures (anywhere from 7 days to up to a year), which gives issuers the freedom to match their borrowing exactly with their cash flow or liability timelines.