One of the reasons for this could be, they say, the tough credit rating norms adopted by credit rating agencies. "There are fewer number of placements of short-term corporate debts taking place now. The only reason I could think of is the difficulty for corporates to get good rating for their offerings," said Bank of India general manager VH Ramakrishnan.

Though the outstandings under CPs in the banking system, the most popular short-term debt instruments, have grown to Rs 4,319 crore in the first six months of this fiscal from Rs 2,070 crore at the end of March, 1998, this growth took place mostly in the first two months. The outstanding figure of CPs has been stagnating at around the same levelsof Rs 4,000-4,500 crore since June.

Ratings assigned to corporate papers in recent times have come down by one or two notches across the board. This has taken away the advantage of short-term debt instruments over cash credit limits for working capital finance, a banker said. For over a year, corporates have been taking advantage of the surplus liquidity with banks and low short-term interest rates to raise money through short-term debt instruments at substantially lower rates than banks' own prime lending rates.

The corporates were taking this route mostly to meet their working capital finance requirements. Cash credit -- the traditional working capital finance mechanism -- is always costlier than CPs.

Most of the triple-A (AAA) rated corporates have been adopting this route. With the downturn in the global economy, the number of companies able to get a triple-A rating has come down considerably, sources in credit rating agencies said.

According to them, many corporates are unwilling to accept therating given to them and often negotiate higher rating with rival credit rating agencies. There has also been instances where some former blue-chip companies have managed to place their unrated debt instruments with banks by showing reference to the rating of their previous debt issues, agency sources said.

Though it is not compulsory for corporates to have their debt instruments rated if it is for private placements, most of the public sector banks insist on rating. Some foreign banks are accepting unrated short-term debt instruments on high coupons, which they are traded in the market like junk bonds. Since the maturity profile of these instruments are at the shorter end, the risk is more amenable to a cursory scrutiny of balance sheet.