Value of CDs climbs to ₹5.75 trn, rates cross 7% for marquee banks

Banks are depending more heavily on the market for certificates of deposit (CDs), whose worth climbed to a record ₹5.75 trillion in the fortnight to January 15, owing to deposit tightness in the system.

- SUBRATA PANDA

Deposit growth among banks is lagging credit expansion by roughly 180 basis points.

CD rates have hardened, with marquee banks, including HDFC Bank and IndusInd Bank, borrowing at over 7 per cent in one-year paper.

The data from Clearing Corporation of India shows that HDFC Bank raised ₹ 450 crore at 7.01 per cent in one-year money, while IndusInd Bank borrowed ₹1,075 crore at 7.49 per cent for the same tenor.

ICICI Bank raised ₹2,685 crore at 6.95 percent.

Though the Reserve Bank of India (RBI) data shows the outstanding CDs in the market topped ₹5,75 trillion, a record high, issuance during the fortnight (January 31) more than halved to ₹40,189 crore from ₹88,512 crore in the fortnight ended December 31 — the second-highest amount raised in a fortnight ever — due to elevated rates.

Banks have increasingly resorted to CDs, with lenders issuing instruments of over ₹3.77 trillion in the last six fortnights.

Issues started picking up since mid-September due to the cumulative effects of rationalisation in goods and services tax and rate cuts by the RBI.