Certificates of Deposit Market - India

2007


19th January 2007

The Certificates of Deposit (CD) market is buzzing with banks going all out to raise funds from the wholesale market. According to the Reserve Bank of India’s (RBI) March bulletin, the outstanding CDs for the fortnight ending 19 January stood at Rs 70,149 crore. This is much higher than the Rs 34,521 crore for the fortnight ending 20 January 2006 and Rs 4,236 crore for the fortnight ending 21 January 2005.
T
he interest rates on CDs, too, have moved up sharply to nearly 8 per cent to 9.55 per cent in January 2007 from the 4.01-6.25 per cent thereabouts in early 2005, in line with the general rise in interest rates in the economy.

So, what explains the surge in CD issuances by banks? Well, while the year-on-year (YoY) growth in money supply, which stood at 20.4 per cent on 5 January 2007 was higher than 16 per cent a year ago and above the projected trajectory of 15 per cent indicated in the Annual Policy Statement for 2006-07, credit offtake is way ahead of the growth in deposits.

http://www.businessworld.in/content/view/1067/1123/