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Informist, Tuesday, Jun. 2, 2026

 

By J. Navya Sruthi and Nandini Sinha

 

MUMBAI – Issuance of certificates of deposit in May was the highest in at least seven years as banks continued to borrow to meet strong credit demand amid lower deposit growth, dealers said. Issuance of these certificates more than doubled in May over April due to low liquidity surplus in the banking system, but was still short of the amount of fundraising banks needed to roll over their maturing certificates.

 

In May, banks raised INR 1.11 trillion through certificates of deposits, more than double the INR 457 billion they had raised in April, according to data from Clearing Corp. of India collated by Informist. CD issuances were up 38% from INR 806 billion in May last year.

 

"Credit disbursements were high while on the deposits front, banks have been facing problem as we can see in CD (credit deposit) ratio," a dealer at a private sector bank said. "Market is expecting at least two hikes (in the Reserve Bank of India's repo rate) in six months because of which credit offtake is high," the dealer said.

 

According to data from the Reserve Bank of India, bank loans rose 16.2% on year to INR 211.87 trillion as of May 15, while deposits were up 12.2% on year at INR 256.89 trillion. The credit-deposit ratio of most banks was over 80% in the March quarter.  

 

The government's Emergency Credit Line Guarantee Scheme 5.0 to help micro, small, and medium enterprises and the aviation sector to manage short-term liquidity amid the ongoing war in West Asia also pushed banks to issue CDs as it added to strong credit offtake, dealers said. Around 10-15% of the total credit offtake was for the government's credit line scheme, the dealer at the private sector bank said.

 

The new credit line scheme provides additional credit of up to 20% of peak working capital utilised during Jan-Mar, but this is capped at INR 1 billion. For airlines, up to 100% of working capital, capped at INR 15 billion per borrower, is available subject to borrowers satisfying specific conditions.

 

Public sector banks contributed nearly 56% of the total supply of CDs in May, with their CD issuances up 26% on year at INR 618.15 billion. Bank of Baroda was the largest issuer, raising INR 253.55 billion last month, followed by Canara Bank, which raised INR 117.6 billion.

 

Fundraising by private sector banks surged over two times on year to INR 479.90 billion in May. HDFC Bank was the largest issuer among private sector banks and raised INR 207.6 billion, followed by Axis Bank, which raised INR 53.1 billion.

 

Market participants said rollovers and low liquidity surplus in May also led to higher CD issuances. The average liquidity surplus in the banking system in May was INR 1.63 trillion, sharply lower than INR 3.88 trillion in April.

 

"Maturities (of CD) were more in May...the supply was high so the rates were also up," a dealer at another private sector bank said. Yields on CDs were high in May also because mutual funds sold short-term debt instruments actively as they faced redemption pressures.

 

In the secondary market, yields on the top-rated three-month CD rose to 7.20-7.25% at the end of May from 6.40-6.45% at the end of April. Rates on one-year CD also rose to 7.75-7.79% at the end of May from 7.10-7.25% at the end of April.

 

Despite a sharp rise in CD issuances in May, issuances remained lower than the INR 1.50 trillion due for redemption in May, mainly due to higher yields.

 

"Some banks have been deferring their borrowing as far as they can, because if you have noted in the end of May, the yields kind of spiked up very sharply in the CP and CD segment," Killol Pandya, head of fixed income at JM Financial, said. "Overall, I think, given that credit uptake is so strong and deposit growth is lagging. I think the banks will eventually come to issue (CD)."

 

COMMERCIAL PAPERS

Companies raised INR 1.38 trillion through commercial papers in May, down 5% on month but up 7% on year, according to data compiled by Informist. Issuances declined on month as fundraising by manufacturing companies fell 58% on month to INR 280 billion as yields rose sharply over April.

 

Yields on three-month AAA-rated CPs issued by non-banking finance companies were 7.90-7.95% at the end of May, up from 6.80-6.90% in April.  

 

Non-banking finance companies raised around INR 427 billion through CPs, up 2% on month, while public sector undertakings such as the Small Industries Development Bank of India, National Bank for Agriculture and Rural Development, and NTPC Ltd. raised INR 216.4 billion through CPs.

 

The amount of funds raised by oil and gas companies declined in May to INR 76.5 billion, sharply down from INR 110 billion worth of papers issued in April.

 

"April was when we really had a lot of concerns regarding our (crude oil) basket (which) was above $110, $115," Pandya said. "It is now at least comfortably below $100...kind of petered off, even the issuances will peter off," he said. Going ahead, fundraising by oil and gas companies will fall owing to the hike in the domestic fuel prices, Pandya said.

 

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

 

CD	May-26	Apr-26	On-month%	May-25	On-year%
State-owned banks	618.15	240.25	157	491.45	26
Private banks	479.90	154.50	211	170.75	181
Others	10.4	1.6	550	140.5	(-)93
Foreign Banks	5	60.65	(-)92	3.25	54
Total	1,113.45	457	144	805.95	38

 

 

 

 

 

 

 

 

CP	May-26	Apr-26	On-month%	May-25	On-year%
Non-banking finance companies	427.39	420.54	2	864.79	(-)51
Manufacturing	279.4	667.79	(-)58	419.78	-33
Brokerages	328.16	186.8	76	-	N.A.
Public sector undertakings	216.4	164	32	-	N.A.
Others	127.85	9.97	1,182	-	N.A.
Total	1,379.2	1,449.1	(-)5	1,284.57	7

 

 

 

 

 

 

 

 

 

 

End

 

Edited by Avishek Dutta

 

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