Informist, Thursday, Dec 28, 2023
–Banks’ Dec CD issuances cross 1 trln rupees, first time in FY24
–Banks raised 1.04 trln rupees via CDs so far in Dec
–Banks’ CD issuance tops 1 trln rupees only 3rd time since March ’19
By Asmita Patil
MUMBAI – Banks have raised more than 1 trln rupees through certificates of deposit so far this month. This is the first time CD issuance has crossed this mark in the current financial year. Indeed, this is only the third time since March 2019 that CD issuance has been higher than 1 trln rupees.
So far till Dec 27, banks have raised 1.04 trln rupees through CDs compared to 758.84 bln rupees raised in November and 775.07 bln rupees in December 2022, data compiled by Informist shows. Public sector banks have mobilised 65% of the total funds raised through CDs this month.
Borrowing through CDs typically increases in December as banks look to disburse additional credit towards the end of the quarter to beef up their balance sheets. This year, banks are also grappling with a large liquidity deficit in the banking system.
At the end of Tuesday, the liquidity deficit in the banking system hit a fresh high of 2.68 trln rupees, according to the Reserve Bank of India data. The liquidity deficit in the banking system has hit new all-time-highs for four sessions straight from Dec 22 till Tuesday.
Failure to mobilise adequate deposits while credit growth is robust has forced banks to rely more on short-term debt such as CDs. According to latest RBI data, advances by banks, excluding HDFC Bank, were up 16.4% on year as of Dec 1, while deposits were up 13.5%. This has forced banks to borrow through CDs despite high rates, which have risen 10 basis points to 7.40-7.60% this month. CD rates are expected to ease in January once government spending flows into the banking system. End
Edited by Ashish Shirke
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