“CD issuances by the banks have been low in the first quarter of current financial year because credit growth is not picking up,” said RK Bansal, executive director, IDBI Bank.
CDs have maturity periods ranging from seven days to one year. These are a form of bulk deposits because minimum amount of a CD Rs1 lakh or more.
Tight liquidity in the banking system has pushed up the interest rates on CDs deterring banks from issuing CDs at higher rates.
Interest rates on CDs, which couple of months banks were hovering around 7-8%, have risen up to 11%. Banks are also avoiding CDs to bring down cost of funds.
“CD issuances are likely to fall further as banks are reducing their dependency on bulk deposits and shifting their focus on retail deposits,” said Ashutosh Khajuria, president of treasury, Federal Bank.