Banks relying on CDs for funding requirement amid credit-deposit growth mismatch: RBI Bulletin

Banks are continuing to rely on certificates of deposits (CD) to meet funding requirements on account of a persisting gap in credit and deposit growth, Reserve Bank of India’s monthly bulletin released on March 19 said.

In the primary market, issuances of CDs grew by 34 percent on-year to reach an all-time high of Rs 10.58 lakh crore during 2024-25 (up to March 7, 2025), the RBI bulletin said.

The money market continues to face stress due to persistent negative system liquidity, driving a surge in short-term funding needs to meet year-end credit demand. Liquidity in the banking system has been under stress in the last few months due to slower government spending, interventions in the foreign exchange market by RBI, and heavy selling by foreign portfolio investors in Indian equities.

The banking system liquidity remained in deficit in the latter half of February and early March (up to March 13, 2025) amidst the seasonal pick-up in currency in circulation (CiC).