India Inc has demonstrated a clear preference for short-term commercial paper (CP) financing over longer-term corporate bond issuances in the current financial year. According to data from Prime Database, there were 1,920 CP issuances by companies aggregating ₹4,39,693 crore up to June 12, 2026, compared to 607 corporate bond issuances totaling ₹1,51,117 crore. This represents a significant shift in corporate funding behavior as companies seek to reduce borrowing costs amid expected interest rate increases.
The data reveals clear yield advantages for commercial paper issuances, with the average yield to maturity for CPs at 7.46% against the average coupon rate of 7.76% for corporate bonds. As reported by The Hindu BusinessLine, this yield differential reflects investor preferences for higher coupon rates on private placement debt due to potential inflationary pressures. The average yield to maturity for CPs was 7.46% compared to the average coupon rate of 7.76% for corporate bonds, according to Prime Database data.
The current preference for CPs represents a continuation from the previous financial year's trends. In the first quarter of FY25 (April-May-June), there were 2,166 CP issuances by companies aggregating ₹4,50,746 crore, while corporate bond issuances totaled ₹3,57,907 crore across 982 issuances. According to Rockfort Fincap LLP's Venkatakrishnan Srinivasan, this shift reflects corporate reluctance to lock into long-term fixed-rate borrowings due to elevated bond yields, geopolitical tensions, and rupee weakness.
Following RBI's monetary policy measures and forex-support initiatives, borrowing costs across markets have declined by 40-60 basis points from pre-policy levels. As reported by The Hindu BusinessLine, Venkatakrishnan Srinivasan expects CP issuances and outstanding volumes to potentially reach all-time highs during FY27, while the NCD market may witness meaningful revival as issuers utilize current funding windows. However, growth in the NCD market may remain relatively moderate compared to CPs as borrowers continue favoring flexibility amid macroeconomic uncertainties.
