Data from the RBI showed that outstanding CDs rose to Rs 6.93 trillion at the end of March 2026, from Rs 5.22 trillion a year earlier, an increase of nearly 33 per cent.
“It is quite evident that many banks used CDs as a way to raise deposits. In March, CD rates were particularly high, typically in the range of 7.25–7.60 per cent. Excluding outliers — where some issuances were even at 8 per cent — a large volume of CDs was raised at these elevated levels. Rates across tenors were also largely flat, with 3-month, 6-month, and 12-month CDs offering almost similar rates at one point. In April, however, CD rates have eased, especially for the 3-month tenor, which has declined by 20–30 basis points. Rates for 6-month and 1-year CDs have also come down marginally,” said a senior banker at a private sector bank.
Marquee banks, including HDFC Bank, Axis Bank, Punjab National Bank, and Canara Bank, among others, have raised CDs at rates ranging from 7.48 per cent to 7.60 per cent. CSB Bank has raised CDs at 8.32 per cent, data from CCIL shows.
Industry insiders said banks’ reliance on CDs stems from several factors, including tight liquidity. Secondly, a pickup in advances has prompted banks to raise additional funds. Thirdly, amid geopolitical risks, banks have preferred to be well funded before lending, adopting a more conservative approach by mobilising funds in advance to avoid a scramble for deposits later. A fourth reason is balance sheet considerations — CDs are counted as deposits, which helps banks show growth.
“That said, CDs are not considered an ideal funding source. They are not relationship-based and do not generate additional business, and are therefore typically used as a stopgap when advances outpace deposits. System-level CD growth has been around 33 per cent, compared with overall deposit growth of about 11 per cent, implying that underlying deposit growth is even lower if CDs are excluded,” the banker quoted above said, adding that banks generally do not prefer to rely heavily on CDs, as they are seen as a less stable source of funding compared with granular customer deposits. “They are typically used as a temporary tool to manage mismatches or to take advantage of higher lending rates, rather than as a long-term strategy,” he said.
Latest RBI data shows that, as of March 15, bank credit grew at 13.8 per cent year-on-year, while deposits have grown by 10.8 per cent.
CDs are negotiable money market instruments issued by banks with maturities ranging from a minimum of seven days to a maximum of one year. Banks rely on CDs primarily because they offer multiple benefits in the financial system, including trading opportunities, liquidity management, and addressing maturity gaps. CDs also serve as a cost-effective alternative to bulk term deposits, contributing to the overall deposit pool. Additionally, they help banks replenish maturing deposits, ensuring smoother liquidity management, which reinforces their dependence on such instruments.
On regulatory aspects, CDs do not always require CRR and SLR in the same way as deposits. For interbank CDs, CRR is not required, though SLR is. However, if CDs are held by mutual funds, insurance companies, or corporates, both CRR and SLR apply.
“In Q4, banks typically face the highest asset-liability mismatch and tend to tap the CD market to bridge the gap, as credit growth outpaces deposit growth during the quarter. In FY26, CD issuance remained elevated as deposit growth lagged credit growth amid tight liquidity conditions, despite various liquidity infusion measures by RBI. However, in FY27, CD volumes will depend on credit growth. In case credit growth slows because of the ongoing war, potentially credit and deposit growth can align,” said Anil Gupta, senior vice president and co-group head – financial sector ratings, ICRA.
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