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Informist, Friday, May 8, 2026

 

By J. Navya Sruthi and Vaishali Tyagi

 

MUMBAI – Issuance of certificates of deposit rose to an at least seven-year high in April as banks borrowed to meet strong credit demand amid slow deposit growth, which pushed their credit-deposit ratio to above the key level of 80%, dealers said.

 

Borrowing through CDs more than doubled on year, despite the surplus liquidity in the banking system rising to INR 5.54 trillion in the first fortnight of April, the highest since May 4, 2022. In April, banks raised INR 457 billion through CDs, up nearly 132% on year, according to the data compiled by Informist. 

 

"Banks were mobilising funds through CD... taking pre-positions in April as there was good credit offtake in March," a dealer at a state-owned bank said. "Deposit growth was not as much as credit growth. So, if you see quarterly (banks') earnings for March, CD (credit-deposit) ratio rose. So we (banks) have to issue CDs," the dealer said.  

 

However, CD issuances in April were down nearly 82% from INR 2.47 trillion in March. Typically, issuances of short-term debt instruments such as commercial papers and certificates of deposit are lower at the start of a financial year due to seasonally weak demand for credit as most companies and banks usually would have met the bulk of their borrowing requirements in March, market participants said.

 

According to the Reserve Bank of India data, bank loans rose over 16% on year to INR 213.61 trillion as of Mar. 31, while deposits were up nearly 14% on year at INR 262.30 trillion. The credit-deposit ratio of most banks was over 80% in the quarter ended Mar. 31, according to the quarterly earnings results of banks released so far.   

 

The RBI considers 60-80% as the ideal credit-deposit ratio for banks. This range supports balanced credit growth without straining liquidity. A CD ratio above 80% means the bank is lending more than its deposits can sustain — which can result in an asset-liability mismatch.

 

Public sector banks contributed nearly 53% of the total supply of CDs in April, with their CD issuances up 57% on year at INR 240.25 billion. Union Bank of India was the largest issuer and raised INR 81.25 billion last month, followed by Bank of India, whose issuances were worth INR 65 billion.

 

Fundraising by private sector banks surged almost three times on year to INR 154.50 billion in April. ICICI Bank was the largest issuer among private sector banks and raised INR 55 billion, followed by HDFC Bank, which raised INR 30 billion.

 

In the secondary market, rates on top-rated three-month CDs fell to 6.55-6.65% at the end of April from 7.60-7.70% at the end of March. Rates on one-year CDs remained broadly unchanged at 7.10-7.20% at the end of April from 7.10-7.15% at the end of March. Rates on three-month, AAA-rated CPs issued by non-banking finance companies were 6.95-7.00%, down from 7.70-7.85% at the end of March. 

 

COMMERCIAL PAPERS

Companies raised INR 1.45 trillion through commercial papers in April, down nearly 9% on year and 19% on month, according to data compiled by Informist. Non-banking finance companies raised around INR 421 billion through CPs, while manufacturing companies raised around INR 668 billion. Dealers attributed this fall in CP issuance to comfortable liquidity in the banking system.

 

Companies had borrowed from banks to meet short-term needs in March and to repay these loans they borrowed through CPs in April, Dhawal Dalal, president and chief investment officer for fixed income at Edelweiss Asset Management Ltd., said. Typically, fundraising through CPs in April tends to be lower, dealers said. 

 

Oil and gas companies raised INR 110.5 billion through CPs in April as crude oil prices were sharply higher due to the war in West Asia. Hindustan Petroleum Corp. raised INR 45.5 billion through three different CPs and Bharat Petroleum Corp. raised INR 30 billion. Oil and gas companies have to borrow from the market to finance their purchases of crude oil as the government is yet to compensate these companies for selling petroleum products at a price far below their costs. 

 

Dealers expect companies and banks to meet their funding needs through short-term debt until corporate bond yields stabilise. Even large borrowers such as oil marketing companies are likely to rely mainly on CPs for fundraising, dealers said. If the war in West Asia drags on, yields could climb further in anticipation of higher inflation, dealers said. On the corporate bond front, issuances continued to fall year-on-year in April as companies largely stayed away from the market due to higher yields.

 

The yield on the three-year benchmark bond was 7.63% at the end of April, little changed from 7.64% a month earlier, but up sharply from 7.40% in the middle of April after the US-Iran ceasefire was announced. The yields on the five-year and 10-year benchmark bonds were at 7.70% and 7.73%, respectively, at the end of April, steady from yields at the end of March.

 

Following are details of CP and CD issuances in April, as per data from the Clearing Corp. of India, in INR billion:

 

CP	Apr-26	Apr-25	On-year%
Non-banking finance companies	420.54	521.24	(-)19.3
Manufacturing	667.79	1053.77	(-)36.6
Brokerages	186.8	-	-
Financial institutions	164	-	-
Others	9.97	12.75	(-)21.8
Total	1,449.1	1,587.76	(-)8.7

 

CD	Apr-26	Apr-25	On-year%
State-owned banks	240.25	152.9	57.1
Private banks	154.50	39.5	291.1
Others	1.6	-	-
Foreign banks	60.65	5	1,113.0
Total	457	197.4	131.5

 

End

 

 

Edited by Tanima Banerjee

 

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