Fresh inflows into Foreign Currency Non-Resident (Bank) deposits could reduce banks' reliance on certificate of deposit issuances during the second quarter of FY27, even as funding requirements across the banking system remain robust, a report said on Monday.
According to the report by domestic credit rating agency India Ratings and Research (Ind-Ra), the pace of FCNR (B) deposit mobilisation would be a key determinant of certificate of deposit (CD) issuance volumes in the July-September quarter, as stronger deposit inflows could lessen banks' dependence on wholesale money market borrowings.
"CD issuance should remain healthy in the near term, supported by strong credit growth and sustained funding requirements across the banking system. However, the pace of fresh FCNR (B) deposit inflows will determine CD issuance volumes during 2QFY27, as stronger deposit mobilisation could reduce banks' reliance on CD funding markets," the ratings agency said.
Certificate of deposit issuances rose to Rs 1.8 lakh crore in June 2026 from Rs 1.1 lakh crore in May, primarily due to a sharp increase in issuances by public sector banks.
State-run lenders raised Rs 1.1 lakh crore in June against Rs 75,000 crore in May.
According to the agency, the surge in June issuance activity was largely driven by sizeable CD maturities falling due during the month, prompting banks to refinance their obligations through fresh issuances.
With the volume of maturing CDs easing in July, issuance levels are expected to moderate from the elevated June levels, although they are likely to remain healthy amid continued credit growth and funding demand, it said.
The ratings agency estimated that about Rs 3.4 lakh crore worth of CDs will mature during July-September 2026, including Rs 50,000 crore in July, Rs 1.14 lakh crore in August and Rs 1.7 lakh crore in September.
Public sector banks account for 56 per cent of these maturities, followed by private sector banks at 42 per cent, while the top five issuers contribute 63 per cent of the total outstanding CDs, indicating continued concentration among large issuers.
Further, on the commercial papers front, the report said that issuances will remain strong in the coming months, supported by robust funding requirements from both NBFCs and corporates.
Healthy credit growth continued expansion in NBFC balance sheets, and persistent working capital demand from corporates is likely to keep reliance on short-term market borrowings elevated, even as operating environments continue to improve.
Refinancing pressures have moderated, with around Rs 4 lakh crore of CPs maturing between July and September 2026, comprising Rs 70,000 crore in July, Rs 1.07 lakh crore in August and Rs 2.31 lakh crore in September.
NBFCs account for 41 per cent of these maturities, while the top 10 issuers represent 47 per cent, underscoring the continued concentration of the market. While concentration risks remain broadly stable, elevated refinancing requirements are expected to sustain healthy primary market activity, the agency added.
