Share of public sector banks in CD issuances rises to 69% in 2024: RBI

Public sector banks accounted for 69 per cent of CD issuances by Dec 2024, up from 6 per cent in 2022, with Q4 FY25 issuance reaching an all-time high of Rs 3.7 trillion

The share of public sector banks (PSBs) in issuing certificates of deposit (CDs) has risen sharply between 2022 and 2024, while private sector banks (PVBs) have seen a corresponding decline, according to a report in the Reserve Bank of India's (RBI’s) latest bulletin.

 

PSBs accounted for 69 per cent of CD issuances in December 2024, a steep rise from just 6 per cent in 2022. In contrast, the share of PVBs dropped from 85 per cent to 30 per cent over the same period.

 

"This contrasts with the general perception that CD issuance is largely dominated by private sector banks to supplement their current and savings account (Casa) deposits," the report said. 

Mutual funds have remained the primary investors in CDs, a trend supported by increased retail participation in equity markets. This has enabled greater asset allocation by mutual funds toward money market instruments, the report added.

 

Driven by robust credit growth outpacing deposit mobilisation and tight liquidity conditions, banks have increasingly relied on CD issuances. In Q4FY25, CD issuances surged to a record ₹3.70 trillion. 

 

“During Q4 FY25, CD issuances hit an all-time high of ₹3.70 trillion, amid robust credit demand, liquidity deficit, and sluggish deposit growth,” the report stated. It also highlighted that small finance banks (SFBs) had to offer relatively higher rates, whereas PSBs were able to raise funds at more competitive rates.

 

Globally, banks and deposit-taking institutions are the primary issuers of CDs, with typical investors including mutual funds, pension funds, insurance firms, and cash-rich non-financial corporations.

 

Issuances spiked in March due to year-end liquidity pressures, as banks turned to CDs to meet short-term funding requirements. 

 

CD issuance volumes have been steadily rising since April 2022, reaching ₹1.17 trillion in March 2025. Total outstanding CD issuances soared to a record ₹11.75 trillion during FY2024–25.

 

In September 2024, the average tenor of CD issuances fell to 146 days, reflecting banks' short-term funding strategies amid expectations of declining interest rates.

 

This contrasts with the period from June 2019 to October 2021, when the average tenor increased from 95 to 296 days — mirroring the onset and peak of the rate-cutting cycle. By May 2022, as the RBI began raising policy rates, the average tenor had decreased to 128 days.

 

Typically, banks prefer longer tenors during periods of rising interest rates to lock in funding costs. In contrast, during a rate-cutting cycle, shorter tenors are favoured unless credit demand remains particularly strong.

 

"Among various maturities, CDs issued for up to 91 days and those between 180 to 365 days dominate, highlighting their dual role as tools for short-term liquidity management and for locking short-term rates over longer horizons," it added. 

Mapping the surge

 

• MFs remained the primary investors in CDs
• Banks increasingly turned to CD issuances driven by strong credit growth
• CD issuances hit all-time high of ₹3.70 trn in Q4FY25 amid robust credit demand, liquidity deficit
• Issuances spiked in March due to tightened liquidity
• Total outstanding CD issuances climbed to record ₹11.75 trn during FY25