Banks' CD borrowings surge; issuance, outstanding at all-time highs

Lenders issued over Rs 1.34 trillion of CDs while outstanding issuances stood at Rs 6.62 trillion

Banks have stepped up their reliance on certificates of deposit (CDs) as deposit accretion remains challenging and lags credit growth. Lenders issued more than ₹1.34 trillion of CDs in the fortnight ended February 15 — the highest ever for any fortnight — while total outstanding CDs rose to a fresh all-time high of ₹6.62 trillion, according to the latest data from the Reserve Bank of India (RBI).

 

This comes even as CD rates remain elevated, with major lenders such as HDFC Bank and ICICI Bank raising short-term funds at a little over 6.8 per cent. Several mid-sized private banks and state-owned lenders have been borrowing at 7 per cent or higher, while Utkarsh Small Finance Bank tapped the CD market at rates as high as 7.9 per cent. Experts said that although the RBI has injected liquidity into the system, short-term rates have remained elevated, even if they have not risen further.

 

They added that banks will continue to rely on CDs as credit growth accelerates towards the business end of 2025-26, unless lenders turn to the bond market for long-term money.

 

The last time CD issuances in a fortnight crossed ₹1 trillion was in the March 21 fortnight, when banks and financial institutions raised over ₹1.17 trillion, driven largely by IndusInd Bank’s heavy borrowing amid pressure on its liquidity coverage ratio following disclosures of discrepancies in its derivatives portfolio.

 

Data shows that banks have issued nearly ₹2.4 trillion in CDs since January this year. In 2025, banks issued over ₹12 trillion CDs.

 

“The surge in CD volumes reflects the challenges banks face in mobilising deposits in line with credit growth. While credit and deposit growth in absolute terms were broadly similar in the fortnight ended January 31, a portion of deposits is set aside for statutory requirements such as cash reserve ratio and statutory liquidity ratio, limiting lendable resources. On a year-on-year basis, deposit growth continues to trail credit growth by nearly 200 basis points (bps), and with the credit-deposit ratio already elevated, banks are increasingly relying on CDs to fund incremental loan demand,” said Sanjay Agarwal, senior director, CareEdge Ratings.

 

RBI data shows that in the fortnight ended January 31, credit growth stood at 14.6 per cent, while deposit growth was 12.5 per cent, reflecting a gap of nearly 200 bps. During the period, credit expanded by ₹3.41 trillion, or 1.7 per cent, while deposits rose by ₹3.82 trillion, or 1.6 per cent.

 

“Unless lenders tap the bond market, CDs remain the most viable funding option in the near term. The trend is likely to persist as borrowers shift back towards bank funding amid elevated capital market rates, keeping credit growth strong. Short-term rates continue to stay elevated despite the RBI’s liquidity infusion, which has helped prevent further spikes but has not materially softened borrowing costs,” Agarwal said.

 

In late January, the RBI announced liquidity measures through open market operations, dollar-rupee buy-sell swaps, and the long-term variable rate repo instrument.

 

CDs are negotiable money market instruments issued by banks with maturities ranging from seven days to one year. Financial institutions, however, can issue CDs with maturities between one and three years. Banks rely on CDs for several reasons, including trading opportunities, liquidity management, and addressing maturity mismatches. CDs also serve as an alternative to bulk term deposits and help banks replenish maturing deposits, supporting smoother liquidity management.

 

India’s largest bank has also flagged the issue of deposit mobilisation. C S Setty, chairman of State Bank of India (SBI), said after the bank’s third-quarter earnings that SBI is mindful of structural shifts in the financial system, particularly the increasing financialisation of household savings towards market-linked instruments. While positive for capital markets, this trend poses a structural challenge for deposit mobilisation and is likely to reshape bank balance sheets over time.