Banks have raised funds through certificates of deposit (CDs) at near two-year highs, reflecting intensified competition for resources and sustained pressure on liquidity, with policy rates remaining steady. According to reports from The Economic Times, data from the Clearing Corporation of India showed CSB Bank offered the highest rate at 8.32% for 91 days, followed by Ujjivan Small Finance Bank and Equitas Small Finance Bank, which raised funds at 8.25% for 366 days and 356 days respectively. Other lenders such as HDFC Bank and IDBI Bank paid 7.6% for 33-day funds. These rates are well above the 3.25% banks typically pay retail depositors for 30- to 45-day deposits.
During the fortnight ended March 31, banks issued ₹1.07 lakh crore of CDs, broadly in line with issuance in the corresponding fortnight last year. As reported by The Economic Times, HDFC Bank, the country's most valuable lender, which has been under investor scrutiny following the sudden exit of chairman Atanu Chakraborty, raised funds at 7.6% for 33 days on March 27, mobilising ₹4,300 crore. Punjab National Bank raised ₹1,175 crore at 7.5% for the same tenor. Union Bank of India raised ₹24,060 crore while Punjab National Bank mobilised ₹12,450 crore in the last fortnight of March, offering rates ranging between 6.9% and 7.5%. According to The Times of India, fresh certificate of deposit issuances jumped 46% year-on-year during the quarter, reflecting growing funding pressure.
The five publicly-listed, differentiated banking entities that have shared their business updates so far have shown over 20% growth in respective gross loan portfolios, significantly higher than the banking sector's average credit expansion. According to latest reports, AU Small Finance Bank, the largest in the group, reported a 21.3% year-on-year rise in assets under management (AUM) to ₹1.40 lakh crore. Equitas' AUM grew by 21.6% to ₹46,183 crore, while Ujjivan logged a 26.6% growth to ₹40,655 crore. Industry average till March 15 published by the Reserve Bank of India showed that bank credit grew by 13.8% year-on-year, 300 basis points more than the average deposit expansion.
Equitas and Ujjivan also reported growth in microfinance lending, even as they focussed on growing their secured business to reduce the concentration risk. Equitas showed a 27.2% annual rise in microfinance portfolio to ₹5,757 crore, while Ujjivan recorded a 12.3% rise to ₹14,696 crore. These lenders also reported a little improvement in asset quality along with the business updates. Suryoday Small Finance said its gross loan portfolio rose by 29% year-on-year to ₹13,201 crore, while Capital's loan growth print stood at 20.9% to ₹8,687 crore. AU Bank and Suryoday Small Finance did not share their portfolio break-up.
According to Systematix Research as reported by The Times of India, the credit-deposit ratio has risen to around 83% in March from 81.7% in December 2025, intensifying competition for funds and forcing banks to rely more on high-cost certificates of deposit. This divergence has been reflected in bank business updates, with most banks reporting faster credit growth than deposit accretion. The only exceptions were HDFC Bank and Yes Bank, where deposit growth exceeded loan expansion. Bank of India reported global advances rising 15.7% year-on-year to ₹7,70,566 crore, while deposits grew 13.6% to ₹9,27,460 crore, pushing its credit-deposit ratio to 83.1% from about 81.6% a year earlier. Kotak Mahindra Bank saw net advances increase 16.2% to ₹4,95,892 crore and deposits rise 14.7% to ₹5,72,457 crore, with its credit-deposit ratio inching up to 86.6% from around 85.5%.
According to VRC Reddy of Karur Vysya Bank as reported by The Economic Times, "While some firming is typical at year-end as banks shore up their balance sheets, this spike goes beyond seasonality. CD rates have moved to elevated levels, signalling deeper funding pressures rather than just a year-end phenomenon." Anil Gupta, co-group head for financial sector ratings at ICRA, explained that "the CD rates do appear high when compared with retail deposit rates or the card rates published by banks, largely because deposit growth has lagged credit growth." He noted that certificates of deposit account for only 2.6% of overall bank deposits and do not materially increase the overall cost of deposits. As reported by The Times of India, the strong double-digit credit growth reflects continued economic momentum, with retail, agriculture and MSME segments driving loan demand.
Reddy indicated that CD rates may ease from the March-end spike but are unlikely to soften meaningfully in FY27. As reported by The Economic Times, he said the underlying drivers - tight liquidity conditions, a persistent credit-deposit mismatch and pressure on deposit mobilisation - are structural rather than transient. The CD rates had earlier climbed sharply during periods of tight liquidity, peaking at about 8.15% between February and March 2024, according to historical data. Banks paid higher rates for shorter-tenor CDs than for longer maturities, with most banks paying around 6.25% to 7% for one-year deposits. According to The Times of India, the trend of banks tapping costly wholesale sources to sustain credit expansion is expected to continue, with the structural credit-deposit gap likely to persist.
