Certificates of deposit issuances jumped three-fold in FY23: RBI data

Certificates of deposit (CDs) issued by banks jumped sharply in FY23 as lenders rushed for deposits amid strong credit demand.

According to the latest RBI data, CD issuances by banks soared to Rs 6.73 trillion in 2022-23 from Rs 2.33 trillion in the previous financial year.

“During 2022-23, amidst buoyant demand for credit growth, the issuances of certificates of deposits (CDs) by banks have risen significantly as compared to the previous year, reflecting additional demand for liquidity by banks to bridge the funding gap between buoyant credit offtake and modest deposit growth,” the RBI said in its annual report for 2022-23.

Bank credit growth in FY23 was 15 per cent year-on-year while deposit growth lagged at 9.6 per cent as of March 24.

On the other hand, due to the hardening of interest rates on commercial papers (CPs) in sync with policy rate hike, firms reduced their reliance on CPs in 2022-23 as evidenced by the significant deceleration in CP issuances during the year, as their appetite for bank credit improved, the report said.

Going ahead, the report said credit growth momentum is expected to continue and banks have to step up deposit mobilisation efforts to fund the growth.

“Return of consumer optimism and improvement in business outlook during the year could help sustain credit growth ahead, though banks may have to step up deposit mobilisation efforts in an atmosphere of declining system-wide surplus liquidity,” the report said.