SBI Raises ₹6,000 Crore Via CDs Amidst Tight Liquidity Crunch

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AuthorKavya Nair|Published at:
SBI Raises ₹6,000 Crore Via CDs Amidst Tight Liquidity Crunch
Overview

State Bank of India tapped the short-term debt market for ₹6,000 crore via Certificates of Deposit at 6%, a rare move signaling deposit mobilization challenges. Banks face mounting pressure to fund rising credit demand, with deposit growth lagging behind loan expansion.

SBI taps Debt Market Amidst Liquidity Squeeze

State Bank of India (SBI) has raised approximately ₹6,000 crore through Certificates of Deposit (CDs) at a 6% interest rate, a move traders flagged as unusual for India's largest lender. This borrowing underscores growing difficulties banks face in attracting deposits to meet escalating credit demand.

Deposit Mobilization Pressure

The funds were secured through CDs maturing in March 2026. The 6% yield offered by SBI on these short-term instruments is notably higher than the rates it offers on bulk deposits, highlighting the urgency to shore up liquidity. This situation arises as deposit growth lags behind robust credit expansion, widening the loan-deposit gap.

Broader Market Strain

Union Bank of India also participated in the short-term debt market, raising ₹200 crore via CDs maturing in May at 6.45%. The broader market faces liquidity pressures stemming from mutual fund selling, higher Treasury bill yields, and strong supply of debt instruments. Liquidity in the banking system, while showing a marginal surplus, remains far from comfortable.

Expert View

Killol Pandya, head of fixed income at JM Financial Asset Management, stated that SBI's presence in the CD market signals robust supply at the shorter end but significant challenges in deposit mobilization. He noted that while the amount is not substantial for SBI, the act of raising short-term funds is indicative of broader systemic stress.

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