With banks’ deposit growth outpacing loan growth, the lenders’ reliance on borrowing through certificate of deposits (CDs) has declined. Outstanding CDs plunged to ₹82,400 crore as on September 15, the lowest in a decade, said a report by rating agency ICRA.
“With weak credit growth from the banking sector and a surge in deposit base post demonetisation, the banks’ reliance on borrowing through CDs has been gradually declining,” Karthik Srinivasan, group head, financial sector ratings, ICRA said.
Outstanding CDs were ₹2.04 lakh crore as on September 16, 2016. CD volumes are expected to remain subdued as the central bank had reduced banks’ statutory liquidity ratio requirement to 19.5% from 20%, along with a 7-8% credit growth expectation, he added.
Credit growth in banks has been sluggish with 6.9% year-on-year growth till September 29 while deposit growth has been 8.7%, according to latest data from the RBI.
Deposit growth received a boost after the ban on high-value notes in November, resulting in lower cost of funds for banks.
