Banks raised ₹1.80 lakh crore via CDs in June, up 38% YoY, as liquidity deficit and credit growth outpaced deposits. HDFC Bank led with ₹26,285 crore. Treasury heads said the RBI's VRR and FCNR scheme eased rates, but LCR stress persists.
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Banks raised ₹1.80 lakh crore through certificates of deposit in June, a 38% jump from a year earlier. Tight liquidity and double-digit credit growth forced lenders to tap short-term funding, according to data from the Clearing Corporation of India compiled by PTI.
June's total was up 61.79% from May's ₹1.12 lakh crore. The surge came as the banking system swung from surplus to deficit after advance tax and GST outflows.
"CD issuances were driven by multiple factors such as liquidity deficit, good credit offtake, tax outflows and lagging deposit," said Alok Singh, group head treasury at CSB Bank.
Five large public and private sector banks accounted for 58.25% of June's CD issuances. HDFC Bank was the largest issuer at ₹26,285 crore, followed by Bank of Baroda (₹24,125 crore), Union Bank of India (₹21,175 crore), Canara Bank (₹17,000 crore) and Axis Bank (₹16,360 crore). Together they raised ₹1.05 lakh crore.
"The stress on LCR and lagging deposit growth forced all the banks to secure deposits through the CD route. When bigger banks are in the market, their size commands a larger share," Singh said.
Systemic liquidity was in surplus from June 1 through June 21, then turned deficit. The Reserve Bank of India responded with 13 Variable Rate Repo auctions across tenures from overnight to seven days, injecting ₹5,97,900 crore of transient liquidity.
Credit growth has stayed in double digits since September last year, after the goods and services tax rationalisation. That pushed loan demand ahead of retail deposit mobilisation.
Rates on CDs hardened in early June as demand for funds peaked. They eased in the second half after the RBI announced a Foreign Currency Non-Resident (FCNR) deposit scheme, Singh added.
The RBI's June Financial Stability Report flagged funding as a key risk for banks.
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