Collapse of commercial papers volume puts debt schemes at risk.
The daily average trading volume of commercial papers 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 (MFs), posing a serious challenge to the liquidity profile of these MFs, India Ratings & Research (Ind-Ra) has warned.
The total outstanding of commercial papers is close to Rs 4.3 trillion. The average trading volume is now less than Rs 4,000 crore.
Non-banking financial companies (NBFCs) and housing finance companies (HFCs) are the major issuers of commercial papers.
Generally, the daily volume is Rs 10-15,000 crore in commercial papers in the secondary market.
On the other hand, papers issued by all India financial institutions, such as Nabard and Sidbi, are not getting traded in the secondary markets, as buyers are not willing to part with these papers in uncertain times. Hence, their share of volume in the secondary markets has also collapsed.