“It has been observed that during the Covid-induced liquidity surplus phase, private banks were frontrunners in issuing the CDs. However, after February 2022, PSBs dominated the share in CD issuance. Foreign banks and relatively new small finance banks have limited presence in the CD market,” according to an article published in Reserve Bank of India’s June bulletin.
Between January 2022 and December 2024, the share of public sector banks in CD issuances rose to 69% from 6%, while that of private banks fell to 30% from 85%.
“This contrasts with the general belief that issuance of CDs is dominated by private banks to complement their current and savings account (CASA) deposits,” said the article, authored by the RBI staff. Views in the article are those of the authors and do not necessarily represent those of the RBI. Liquidity, interest rate expectation, and volatility determine CD issuance in the long run. Increase in credit advances with lower deposit mobilisation also prompts higher issuances.
Liquidity is found to be the major driver of CD issuances in the short run as well. In January-March of 2025, CD issuances had reached an all-time high of ₹3.70 lakh crore, in the backdrop of higher credit demand coupled with deficit liquidity and subdued deposits’ growth.
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Average tenor of the CD issuance and the weighted average effective interest rate (WAEIR) are tracked to gauge short-term funding dynamics among different categories of commercial banks.The article said the average tenor of CDs issued by private sector banks is higher at 222 days, implying that they raise funds to not just meet the short-term funding requirements but also for locking in lower interest rates. “PSBs have an average tenor of 155 days, indicating use of CDs mostly as instruments for their short-term funding needs,” it said, adding that these banks enjoy lower cost of CD issuance on an average than others.
