SBI raises Rs 500 cr through CDs

State Bank of India (SBI), the country’s largest lender, on Tuesday raised Rs 500 crore at 9.05 per cent through three-month certificates of deposit (CDs).

Banks on Tuesday raised around Rs 2,000 crore by issuing three-month CDs in the range of 9.05-9.65 per cent. While Union Bank of India raised four-month CDs at 9.8 per cent, Corporation Bank raised Rs 250 crore through one-year CDs at 9.75 per cent.

CDs are money market instruments issued by lending institutions to meet short-term funding needs.

In its mid-quarter review of the monetary policy, the Reserve Bank of India (RBI) reduced the statutory liquidity ratio by one per cent of the net demand and time liabilities to ease the liquidity strain.

At the end of every quarter, banks increase CD issuances to meet quarter-end targets.

Liquidity has been in a deficit mode and the situation is likely to continue unless the government loosens its purse strings. Over the past fortnight, most banks have raised retail deposit rates by 25-175 basis points. Deposit mobilisation has been lower than RBI’s projection of 18 per cent. Deposit growth was 14.97 per cent as on December 3.

Market dealers expect one-year as well as four-month deposits to touch 10 per cent soon.