Banks’ issue of certificate of deposit up 25% to ₹7.89lakh cr in FY24 till Mar 8

Fund mobilisation by Banks through certificate of deposit (CD) issuances surged 25 per cent yearonyear (yoy) to ₹7.89lakh crore during the financial year so far (up to March 8), per RBI data. This comes in the backdrop of deposit growth lagging credit growth.

Banks had mopped up ₹6.33lakh crore via CD issuances a year ago. They had Banks resorted to borrowings through CD issuances to meet demand for credit, according to an article in RBI’s latest monthly bulletin.

CD is a negotiable, unsecured money market instrument issued by a bank as a promissory note against funds deposited at the bank for a maturity period up to one year. They are issued in minimum denomination of ₹5 lakh and in multiples of ₹5 said RBI officials in the article “State of the Economy.” “With the statutory requirements for CRR (cash reserve ratio) and SLR (statutory liquidity ratio) at 4.5 per cent and 18 per cent, respectively, around 77 per cent of deposits were available with the banking system for credit expansion as on February 23, 2024. The deposit base was supplemented by CDs issuances,” they said.

The share of term deposits offering 7 per cent and above interest rates has also increased to 61.4 per cent in December 2023 from 33.5 per cent in March 2023 and 4.5 per cent in March 2022.

CP ISSUANCES FLAT

Commercial paper (CP) issuances remained largely steady at ₹12.2 lakh crore during the financial year so far (up to February 29) from ₹12.5 lakh crore in the corresponding period last year, per the report.