Large banks raise record funds via CDs in 2025

Hand putting coins on stack with show stock market graph and investment and currency exchange. concept saving money and financial growth. istock photo for BL
| Photo Credit:
iStockphoto

Major banks secured unprecedented funds through certificate of deposit (CD) issuances during calendar year 2025, driven by sluggish growth in organic term deposits and low-cost CASA accounts alongside sustained credit expansion.

Loan demand has accelerated across retail, MSME, and corporate segments, with advances projected to rise 12-13% while deposits lag at 9-10%. Declining repo rates have compressed deposit yields, prompting investors to explore higher-yielding alternatives,” remarked Harsh Dugar, Executive Director at Federal Bank.

“This dynamic has increased banks’ dependence on bulk deposits and CDs at record levels. Though concentration risks from large deposits and maturity clustering require monitoring, CDs currently represent a manageable share of total deposits,” he added.

Unprecedented Volume

Data from Prime Database accessed by businessline reveals banks mobilized ₹13.04 lakh crore through 1,398 CD issuances in 2025 – an all-time high. CDs offer higher returns than fixed deposits despite shorter tenures.

“CD pricing significantly exceeds sovereign instruments, with top-rated banks paying 70-150 basis points above comparable Treasury bills. Meanwhile, retail deposit rates remain depressed, underscoring the widening gap between institutional and retail funding costs. While private banks use CDs tactically for liquidity, public banks risk structurally elevating funding expenses through repeated issuances,” noted Venkatakrishnan Srinivasan, Managing Partner at Rockfort Fincap.

Bank of Baroda, HDFC Bank, Punjab National Bank, Canara Bank, and Axis Bank dominated primary and secondary CD markets. HDFC Bank accelerated CD fundraising to temper its post-merger credit-deposit ratio, while other issuers capitalized on robust credit growth.

Credit-Deposit Imbalance

Anil Gupta, Co-Group Head of Financial Sector Ratings at ICRA, explained that credit expansion has surpassed deposit growth since recent GST rate reductions, widening funding gaps. Despite rising volumes, outstanding CDs represent just 2% of total deposits versus 8% during 2012 peaks. “Liquidity Coverage Ratio requirements discourage over-reliance on CDs, as they constrain banks’ liquidity buffers,” he emphasized.

Sanjay Agarwal, Senior Director at CareEdge Ratings, observed, “Many public banks leverage surplus SLR holdings to fund credit via TREPS and CDs instead of raising deposit rates. This strategy maintains competitiveness while easing net interest margin pressures.”

Soumyajit Niyogi, Director at India Ratings & Research, highlighted systemic shifts: “Household savings increasingly flow to mutual funds and insurance products, which recycle capital into banks via CDs. Simultaneously, banks rely more on market instruments for efficient asset-liability management, causing funding costs to increasingly reflect market conditions.”

Published on December 28, 2025