The gap between credit and deposit growth is underlined by the fact that credit grew at a faster rate of 14.5% as of December 31, 2025, while deposit growth was 12.7%.
The average interest rate on CD issues with a term of two to three months has hardened from 6.00-6.10 percent in the past month to 6.50-7.00 percent now. In addition, the average interest rate on one-year CD issues has increased from approximately 6.65 percent to approximately 7.03 percent.
In the current fiscal year to date (till January 20, 2026), the number of CD issues was higher at 1,078 (compared to 974 in the previous year period), even as the total amount raised by banks and financial institutions through the issues was marginally higher at ₹ 9,51,095 crore (₹ 9,25,665 crore), according to data sourced from Prime Database.
In FY25, the number of CD issuances rose to 1,346 (from 969 in FY24), with the total amount raised by banks and financial institutions rising to ₹13,23,865 crore (₹9,56,984 crore), per information compiled by the capital markets data provider.
The gap between credit and deposit growth is underlined by the fact that credits grew at a faster rate of 14.5 percent as of December 31, 2025, while deposit growth was 12.7 percent.
So, banks are bridging this gap by using CDs, while interest rates on fixed and savings bank deposits have fallen due to the cumulative reduction in repo rate by 125 basis points in the last year or so.
According to RBI data, the interest rate on term deposits with a maturity of more than one year fell to 6.00/6.50 percent on January 16, 2026, from 6.00/7.25 percent on January 17, 2025. Furthermore, the interest rate on savings bank deposits fell to 2.50 percent on January 16, 2026 from 2.70/3.00 percent.
Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap LLP, said banks have increasingly turned to short-term CDs to meet increasing funding needs, with issuances largely concentrated in the 1-3 month segment but stretching up to a year.
CD revenues in one year
“Yields on one-year CDs have risen sharply, reaching levels of up to 7.49 percent, underscoring high short-term financing costs and an increasing reliance on rollover financing. The rise in CD yields reflects increasing pressure on banks’ liability management amid strong credit growth,” he said.
With credit growth continuing at double digits and deposit growth lagging behind, banks are expected to scale up CD lending as the fiscal year comes to an end, raising the possibility that total issuance could cross last year’s level (of ₹13,23,865 crore) by March 2026, according to Venkatakrishnan’s estimate.
He noted that deposit rates broadly reflect the cumulative 125 basis points cut in policy repo rate by the Reserve Bank of India, but have become relatively less attractive for households. Retail deposit mobilization has gradually declined as small savings schemes and RBI-backed instruments of the Indian government continue to offer higher risk-free returns, leading to a slow but steady shift of household savings to bank deposits.
Published on January 25, 2026
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