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Mumbai, Nov 23 (IANS) Indian banks significantly increased their borrowings through certificates of deposits (CDs) by about Rs 55,000 crore in the fortnight ended November 14, the highest since mid-September, according to Reserve Bank of India (RBI) data.
The surge is driven by strong credit (loan) demand which is outpacing deposit growth in the banking system.
The volume of CD issuance in the first half of November 2025 was double that of the previous two fortnights.
The credit-deposit ratio of the banking system has crossed the 80 per cent mark for the first time, reaching 80.47 per cent by October 31, 2025.
This shows that banks are lending too much of their deposits and they need alternative funding sources.
Banks are relying on market borrowings such as CDs to meet the continued demand for loans, as deposit growth remains in single digits while loan growth is in strong double digits due to the growing economy.
According to market sources, the increase in CD lending was partly influenced by a decline in short-term borrowing rates after lower-than-expected cut-off yields were set in a recent Treasury-bill auction, making CD issuance more attractive.
Funds raised through certificates of deposits increased as lending rates fell after the RBI set lower-than-expected cut-off yields in the weekly treasury-bill auction, prompting banks to ramp up issuance of certificates of deposits.
Analysts said the RBI set the cut-off on 91-day T-bills at 5.38 per cent, which was lower than market expectations.
There is also good demand for CDs from mutual funds, which supports banks’ ability to issue these instruments.
Market analysts said banks are expected to continue to rely on CDs to meet year-end credit demand, especially during the festive season when retail sales peak.
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 fixed deposits, contributing to banks’ overall deposit pool.
Additionally, they help banks to replenish mature deposits, thereby smoothening liquidity management, which reinforces their dependence on such instruments.
–IANS
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