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Massive banks raised file funds through certificates of deposit (CDs) issuances in calendar yr 2025 as natural time period deposit and low-cost present account and financial savings account (CASA) progress remained tepid, whereas credit score progress noticed sustained pickup, specialists mentioned.
“There was good progress in advances, with demand pickup seen in all segments together with retail and MSME loans. The advances are anticipated to develop at 12-13 per cent, with deposits lagging at 9-10 per cent. With drop in repo charges, the deposit charges throughout the banking sector have come off leading to buyers exploring different avenues to park surpluses,” mentioned Harsh Dugar, ED, Federal Financial institution.
“On account of this issue, there’s elevated reliance in bulk deposits and CDs by banks which is at an all-time excessive. Whereas extreme reliance on excessive worth deposits and CDs will not be fascinating, given focus danger and bunching up of maturities, it’s presently not a big proportion of whole deposits to trigger any important concern,” he added.
Report issuances
In accordance with Prime Database knowledge sourced by businessline, banks raised ₹ 13.04 lakh crore through CDs within the main market by way of 1,398 offers in present calendar yr, a file excessive. CDs have shorter tenure however provide greater rates of interest than fastened deposits.
“From a pricing perspective, CDs are materially costlier than sovereign money-market devices, with top-rated banks providing yields roughly 70 to 150 foundation factors above comparable Treasury payments, relying on system liquidity. On the similar time, retail fastened deposit charges stay considerably decrease. This divergence highlights the rising hole between institutional and retail funding prices and raises questions across the sustainability of counting on short-term wholesale borrowings. For personal sector banks, that is typically a tactical liquidity administration instrument, however for PSU banks, repeated CD issuance dangers structurally pushing up funding prices,” mentioned Venkatakrishnan Srinivasan, Founder and Managing Accomplice, Rockfort Fincap LLP.
Financial institution of Baroda, HDFC Financial institution, Punjab Nationwide Financial institution, Canara Financial institution and Axis Financial institution have been the biggest issuers of CDs within the main and secondary market. HDFC Financial institution has been elevating deposits at a quicker tempo than banking system lately to decrease its credit-deposit ratio, which peaked post-merger of erstwhile HDFC with the lender, whereas different main issuers have posted sturdy credit score progress in 2025.
Quicker advances progress
Anil Gupta, co-group head-financials sector scores at ICRA, says banks’ credit score progress has been outpacing deposit progress since GST price cuts, resulting in mismatch in funding necessities, main to extend in issuances and excellent quantity of CDs. Nonetheless, regardless of the rise, total CDs excellent stays at round 2 per cent of banks’ whole deposits, versus peak stage of 8 per cent in 2012. The introduction of liquidity protection ratio (LCR) norms has restricted the reliance of banks on CDs to fund credit score progress, as they act as a drag on LCR, he mentioned.
Sanjay Agarwal, senior director, CareEdge Scores, mentioned, “Many PSU banks have surplus SLR investments. They like to lift funds from TREPS and CDs to fund their advances, moderately than rising charges to draw extra deposits. This helps them stay aggressive as additionally handle the squeeze on NIMs.”
Soumyajit Niyogi, Director, India Scores & Analysis, mentioned structural shifts within the deposit market are pushing banks in direction of market-based devices to handle ALM extra successfully. “Accordingly, the funding price is more and more being decided by market dynamics. Additional, households are reallocating financial savings in direction of MFs and insurance coverage, which in flip are recycling these flows again to banks by way of investments in CDs and different financial institution bonds,” he mentioned.
Revealed on December 28, 2025
