State-owned lenders dominated the issuances of certificates of deposit (CD) in June amid an ongoing fight for deposit mobilisation, with Bank of Baroda, Canara Bank, Punjab National Bank and Union Bank of India raising large sums, while in the private banking space, HDFC Bank and Axis Bank were the large issuers of CDs.
Banks’ reliance on the CDs has continued despite liquidity in the banking system in huge surplus, with experts attributing this to rollover of papers maturing in June and support from the deposit base.
During the rollover of CDs, banks usually issues new one to replace the older CDs helping banks lower their borrowing cost and reduce redemption pressure of papers.
The higher surplus liquidity in the banking system has led to a fall in overall issuances of CDs by 12 percent on-year in June. According to the Clearing Corporation of India’s (CCIL) data, banks raised Rs 1.31 lakh crore in June, 2025, through CDs, as compared to Rs 1.49 lakh crore in June, 2024.
Currently, liquidity in the banking system is estimated to be in surplus of around Rs 2.94 lakh crore as on July 13, RBI data showed.
Of the total CD issued in June, share of Bank of Baroda, Canara Bank, Punjab National Bank, Union Bank of India, HDFC Bank, and Axis Bank, remained 76.2 percent.
Bank of Baroda raised Rs 14,525 crore, Canara Bank raised Rs 13,885 crore, Punjab National Bank raised Rs 17,950 crore, and Union Bank of India raised Rs 19,175 crore, through CDs. Similarly, HDFC Bank raised Rs 20,725 crore, and Axis Bank raised Rs 13,460 crore.
“Banks are increasingly relying on CDs to meet funding needs as competition has intensified in the bulk deposit space”, RBI said in its June bulletin.
The bulletin also added that the share of private banks in CDs has declined from 85 per cent in January 2022 to 30 per cent in December 2024, and concomitantly the share of PSBs has increased from 6 per cent to 69 per cent during the period.
In the last few quarters, banks have been struggling with deposit mobilisation, especially on the current and savings account (CASA) front, due to unattractive interest rates for depositors as other financial products offered greater returns.
Even after this, banks have been able to manage the CASA deposit at competitive levels in Q4FY25. Banks, especially state-owned ones, were able to maintain the CASA ratio within the guided level or slightly lower, thanks to the introduction of innovative products.
Additionally, stress over CASA ratio has increased after the central bank started the rate-cutting cycle, leading to banks adjusting rates on these deposits. So far, the RBI has cumulatively cut 100 bps repo rate to support growth.
As per provisional data released by banks showed that worries over the slower growth in the CASA deposit for Indian lenders are seen sustaining in the first quarter of the current financial year.
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