Indian companies are increasingly utilizing commercial papers (CPs) to raise funds from the market, while banks are turning to certificates of deposit (CDs) to take advantage of negotiable borrowing costs. This shift in borrowing preferences comes as the Reserve Bank of India (RBI) has mandated banks to maintain an incremental cash reserve ratio (CRR) of 110% of net demand and time liabilities (NDTL). CPs offer companies a direct route to borrow funds from investors in the market, providing them with flexibility and convenience. By tapping into the CP market, companies can access short-term funds quickly, without going through the cumbersome process of securing a traditional bank loan. This makes CPs an attractive option for entities looking for immediate cash flow solutions. On the other hand, banks are favoring CDs as a means to optimize their borrowing costs. CDs are negotiable instruments that offer a fixed interest rate for a specified term, providing banks with a reliable source of funds. By issuing CDs, banks can attract investors looking for safe and stable investment opportunities. Moreover, CDs can be traded in the secondary market, allowing banks to exit their positions before maturity if needed. The increased utilization of CPs and CDs highlights the evolving landscape of borrowing and lending in India. While commercial banks have traditionally been the primary source of funding for businesses, the rise of the CP and CD market demonstrates a shift towards direct market financing. This trend offers benefits for both companies and banks. Companies can access funds more efficiently and at potentially lower costs, while banks can optimize their cost of funds and diversify their sources of funding. However, it is important to note that while CPs and CDs offer advantages, they also come with their own risks. The market for CPs and CDs is influenced by factors such as credit ratings, market liquidity, and interest rate fluctuations. Companies and banks need to carefully assess these risks before engaging in CP and CD transactions. Overall, the resurgence of CPs and CDs in India reflects the changing dynamics of the financial system, with market-based funding gaining prominence alongside traditional bank lending.