Commercial Banks Raise Record Rs 1.45 Tn Through Certificates of Deposit; 76% YoY Growth

Recent data from the Clearing Corporation of India (CCIL) showed a steep rise in fund collection by commercial banks through Certificates of Deposit (CDs). June data highlights a sharp 76 per cent increase in fund mobilisation compared to the previous financial year (2023-24).

In June, commercial banks gathered Rs 1.45 trillion through CDs to strengthen their balance sheets before the quarter-end.

A CD is a negotiable, unsecured money market instrument issued by a bank as a usance promissory note against funds deposited at the bank for a maturity period of up to one year. They are issued in minimum denominations of Rs 5 lakh and in multiples of Rs 5 lakh thereafter.

According to data from the CCIL, 2024 showed a remarkable increase in CD issuance compared to 2023. In January 2023, issuance stood at Rs 60,007 crore, peaking at Rs 87,500 crore in the early months before experiencing fluctuations throughout the year. 

By December 2023, issuance settled at around Rs 116,425 crore, indicating a steady rise towards the end of the year.

In contrast, 2024 started with a much higher figure of Rs 1,45,925 crore, indicating robust demand for short-term debt instruments right from the beginning. The data for 2024, available only until June, revealed a significant upward trend, surpassing the previous year's highest point early in the year and maintaining strong issuance levels.

According to industry experts, this surge could be attributed to a decline in short-term rates coupled with reduced treasury bill supply in June. The Reserve Bank of India (RBI) also reduced treasury bill issuance by Rs 60,000 crore from 22 May to 26 June this year.