Indian Banks and Public Financial Institutions raised record high funding through certificates of deposits amounting to Rs. 646.37 thousand crores in the quarter ending March 2026. This growth in quarterly CD issuances was seen across Private Banks, Public Sector Banks and Public Financial Institutions, marking 42% rise over last year. Primarily in the recent past, banks have increased reliance on CDs as short-term funding instrument, especially dominated by private sector banks. Total CD volumes grew from Rs. 675.63 thousand crores in FY24 to Rs. 1,313.13 thousand crores in FY25 to Rs. 1,544.48 thousand crores in FY26. In the current month as on April 22, certificates of deposit amounting to Rs. 35.57 thousand crores have been issued.
In FY26, it was majorly driven by the funding pressure in the banking system, despite measures by RBI to inject funds. Banking system liquidity remained under stress due to Foreign exchange intervention, tax outflows, sustained currency leakages, and a widening credit-deposit gap. Bank credit Y-o-Y growth has been consistently increasing from ~9.6% in Q1 to ~10.1% in Q2, ~12.5% in Q3, and ~14.5% in Q4 (till Feb’26). Faster growth in credit than in deposits led to balance sheet mismatches and a squeeze towards the end of this fiscal, which got covered by CDs.
CD rates in the quarter ending March 2026 were quite elevated with 2-month CD, 3-month CD and 6-month CD offering benchmark rates at ~7.26%, ~7.20%, and ~7.18%, respectively. Such rates were largely flat across tenors, with 3-month CD and 6-month CD offering almost similar benchmark rates. In March, these rates were relatively higher, where a significant volume of 3-month CD and 12-month CD were issued to private bank issuers even at elevated levels around 8%.
With systemic liquidity gradually easing and RBI continuing to manage rates, CD issuance volumes in the near term are likely to moderate. The trajectory of foreign exchange intervention, currency fluctuations, and credit-deposit gap remains key monitorable.
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