Commercial banks take CD route to narrow credit-deposit growth gap

Commercial banks raised Rs 1.45 trillion through certificates of deposit (CDs) in June, 76% higher than the previous month, to strengthen their balance sheets. In Q1 2024-25, Rs 2.6 trillion was raised via CDs, compared to Rs 1.6 trillion in Q1 2023-24. Robust credit offtake and sluggish deposit growth prompted banks to rely on bulk deposits and CD issuances. Bank credit grew 15.6% year-on-year as of June 14, while deposit growth was 12.1%. The credit-to-deposit ratio rose to 79.59% in May. Reduced treasury bill supply led to increased CD issuances, with short-term rates declining, driven by public sector banks.