Certificate of deposit (CD) issuances grew by more than 65 per cent (y-o-y) to Rs 4.51 lakh crore during 2024-25 (up to September 6), significantly higher than Rs 2.72 lakh crore in the corresponding period of the previous year to meet funding requirements of banks to bridge the gap between credit and deposit growth. “CP issuances also increased to Rs 6.28 lakh crore during 2024-25 (up to August 31), higher than Rs 5.88 lakh crore in the corresponding period of the previous year,” according to the RBI Bulletin. With the Reserve Bank increasing risk weights on bank loans to NBFCs, CP issuances by NBFCs increased as they diversified their funding sources beyond banks, it said.
Easing liquiditySurplus liquidity in the banking system moderated in the latter half of August, driven by build-up of government cash balances due to GST payments. In early September, however, a pickup in government spending led to the return of liquidity to the banking system. Overall, the average daily net absorption under the liquidity adjustment
facility (LAF) decreased to Rs 1.45 lakh crore during August 16 to September 17, 2024, from Rs 1.52 lakh crore during July 16 and August 15, 2024.
Of the average total absorption of Rs 1.58 lakh crore from August 16 to September 17, 2024, placement of funds under the standing deposit facility (SDF) accounted for about 63 per cent. The Reserve Bank conducted two main and fourteen finetuning variable rate reverse repo (VRRR) operations, with maturities ranging from overnight to 7 days, cumulatively absorbing Rs 5.41 lakh crore from the banking system.
Banks have shown reluctance to part with liquidity for longer tenors, as evidenced by lower offer-cover ratios in the main operations. One variable rate repo (VRR) operation of 3-day maturity was also conducted on September 17, 2024, injecting Rs 0.83 lakh crore into the banking system. Average daily borrowings under the marginal standing facility (MSF) were at Rs 0.05 lakh crore during August 16 to September 17, 2024 as compared with Rs 0.04 lakh crore during July 16 and August 15, 2024, the central bank said.
