CP, CD issuances rise in May on tight liquidity conditions

Issuances of certificates of deposit (CD) and commercial paper (CP) surged in May due to tight banking system liquidity and diversified borrowing by non-banking finance companies (NBFCs). \r

Banks raised ₹82,580 crore through CDs, a 35.12% increase from May 2023, while companies issued ₹1.34 lakh crore in CPs, up from ₹1.18 lakh crore last year. The Reserve Bank of India's increased risk-weight norms on bank credit to NBFCs spurred higher CP issuances. \r

Despite a liquidity deficit prompting banks to raise market funds, government spending turned liquidity positive in June. Yields on CPs and CDs rose by 5-109 basis points in May, reflecting increased demand for funds amid the crunch.