Indian Lenders Pay Steepest Premium for Short-Term Funds in 6 Years as Borrowings Hit Record

• Indian lenders are paying the highest premiums for short-term funds since the Covid-19 crisis, driven by sluggish deposit growth.
• Outstanding Certificates of Deposit (CDs) reached a record high of 6.64 trillion rupees ($71.04 billion) as of February 28, a 75% jump in two years.
• The FBIL three-month CD benchmark rate surged to 7.41%, with the spread over treasury bills hitting 210 basis points, levels last seen in March 2020.
• Banks rely on CDs to raise funds from institutional investors due to strong credit growth outpacing deposit growth.
• Lenders are seeking RBI approval to sell CDs of up to three years to diversify liabilities and ease pressure on the three-month bucket.