With deposit growth in the banking system lagging credit growth by about 180 basis points (bps), banks are increasingly tapping the certificate of deposit (CD) market, cumulatively raising Rs 88,512 crore in the two weeks to December 31, 2025 — the second-highest quantum ever mobilised in a single fortnight. CD rates have also surged, with some marquee banks borrowing at 7 per cent and above for short-tenor funds as there is funding tightness in the system.
Previously, in the fortnight ended March 21, 2025, banks had raised Rs 1.17 trillion, the highest quantum raised in a fortnight, as this period saw IndusInd Bank aggressively tapping the CD market with its liquidity coverage ratio declining after the disclosure of discrepancies in its derivatives portfolio.
Since November 2025, banks have tapped the CD market to raise over Rs 3.36 trillion as deposit growth in the system has been lagging credit growth.
Credit growth outpaces deposits, RBI data show
As per the most recent data from the Reserve Bank of India (RBI), in the fortnight ended December 31, credit growth stood at 14.5 per cent, while deposit growth stood at 12.7 per cent.
How certificates of deposit support bank liquidity
CDs are negotiable money market instruments issued by banks with maturities ranging from a minimum of seven days to a maximum of one year. CDs serve as a cost-effective alternative to bulk term deposits, contributing to the overall deposit pool of banks. Additionally, they help banks replenish maturing deposits, ensuring smoother liquidity management, which reinforces their dependence on such instruments.
CDs are rated by approved rating agencies, enhancing their tradability in the secondary market based on demand. Banks rely on CDs primarily because they offer multiple benefits in the financial system, including trading opportunities, liquidity management, and addressing maturity gaps.
Outstanding CDs lower despite strong issuances
Although issuances in the fortnight ended December 31 were the second highest ever, the total outstanding CDs in the system stood at Rs 5.68 trillion, which was lower than the Rs 5.7 trillion level reached during the fortnight ended November 28, which was a record high. This is because short-tenor CDs are maturing, and banks are replacing them with wholesale deposits from sources other than the CD market.
“Commercial paper (CP) and certificate of deposit (CD) rates have firmed up despite a policy rate cut due to tight liquidity conditions. Unless the Reserve Bank of India (RBI) introduces liquidity-boosting measures, CD rates are likely to remain elevated. In this environment, banks may increasingly tap bulk deposits outside the CD market,” said Anil Gupta, senior vice president and co-group head (Financial Sector Ratings) at Icra.
Wholesale deposits likely to fund future credit growth
Going ahead, banks are expected to increasingly rely on wholesale deposits to fund credit growth, potentially pushing up the total outstanding stock of CDs. However, experts noted the limitations of the CD market, where mutual funds are the dominant investors. With corporate issuers offering more attractive rates in the three- and six-month CP market, a significant share of mutual fund flows is being diverted there instead of into CDs.
 "Banks raise Rs 89.5k crore via CDs in December fortnight, rates surge")
