Lenders ramp up CP-CD use to navigate liquidity crunch

FY25 commercial paper, certificate of deposit issuances hit 3- and 5-year highs, respectively

- Anshika Kayastha

Both banks and non-banking financial companies relied heavily on raising short-term funds from capital markets to meet the shortfall in their capital amid persistently tight system liquidity through most of FY25. Fundraising via commercial papers (CPs) was the highest in FY25 in the last three years, whereas funding through certificates of deposit (CDs) was the highest in the last five years, according to data by primedatabase.com.

CDs are issued by banks, while corporates issue CPs. Both are short-term money market instruments used to raise funds ranging from a tenor of one week to up to one year. As per the data, CDs worth 13.2 trillion were issued by banks in FY25 compared with 9.6 trillion in FY24. Similarly, CPs worth 10.6 trillion were raised in FY25, up from 9.3 trillion in the previous year. Of this, CPs issued by non-bank financial companies, including NBFCs, HFCs and investment companies, amounted to 7.5 trillion in the last financial year as against 6.3 trillion in FY24.