The daily average trading volume of commercial papers (CP) has fallen to less than 1 per cent of the outstanding amount, and just about 1 per cent of the holding of debt mutual funds, posing a serious challenge to the liquidity profile of these mutual funds, India Ratings has warned.
The total outstanding of commercial papers is close to Rs 4.3 trillion, while the average trading volume is now at less than Rs 4,000 crore. Non-bank financial companies (NBFC) and housing finance companies (HFC) are the major issuers of commercial papers.
Generally, the daily volume is Rs 10-15,000 crore in CPs in the secondary market.
“The daily CP trades in the secondary markets is less than 1 per cent of the total outstanding amount and around 1 per cent of the total exposure of debt mutual funds in CPs,” India Ratings and Research said in a note.
They are not as active in these markets as before as investors are also shying away from buying these papers both in the primary and the secondary market. On the other hand, papers issued by All India Financial Institutions, such