NaBFID's debut CD raises ₹5,000 crore at 6.95% amid strong demand

NaBFID's maiden one-year CD issue raised Rs 5,000 crore at 6.95%, pricing tighter than comparable AIFI issuances and signalling strong investor confidence in short-term funding markets

NaBFID raised Rs 5,000 crore through its debut one-year certificate of deposit (CD) issuance at 6.95 per cent on Wednesday. The paper was priced 5–7 basis points finer than comparable issuances by other all-India financial institutions (AIFIs) such as the National Bank for Agriculture and Rural Development (NABARD) and the Small Industries Development Bank of India (SIDBI).

 

Market participants said that for a debut transaction, pricing tighter than comparable AIFI issuers underscores both investor confidence in NaBFID’s credit profile and the depth of demand in the short-term funding market.

 

Following the issuance, increased participation by development finance institutions is expected to diversify short-term funding channels and enhance overall market depth.

 

“From a market structure perspective, this issuance also deepens the AIFI segment in the certificate of deposit space. Traditionally dominated by banks, the CD market is now witnessing greater participation from development finance institutions, which helps diversify short-term funding channels,” said Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap LLP.

 

For NaBFID, establishing a CD curve at competitive pricing carries strategic significance. “It builds funding optionality and creates benchmarks for future rollovers, CPs and potentially longer-tenor bond issuances,” he added.

 

While the CD segment has seen healthy demand, broader debt markets have presented mixed sentiment in recent sessions. A planned three-year NaBFID bond auction in the previous week was called off after receiving bids at yields that exceeded acceptable levels amid rising benchmark yields as investors remain cautious on longer tenors. For the three-year bond, market participants said that on the base size of Rs 1,000 crore, bids were received at a yield of around 7.15 per cent.

 

“The short-term demand has picked up while the investors remain cautious in the long term; a meaningful decline in bond yields is not expected in the near term,” said a dealer at a state-owned bank.

 

The one-year CD issue was reportedly oversubscribed and closed at a tighter spread. In the current liquidity environment, institutional investors, including mutual funds, banks and treasury desks, appear comfortable allocating to well-rated public sector development finance institutions, said market participants.

 

Latest data by the RBI showed that banks issued more than Rs 1.34 trillion of CDs in the fortnight ended February 15, the highest ever for any fortnight, while total outstanding CDs rose to a fresh all-time high of Rs 6.62 trillion.