Banks’ short-term market borrowing has become cheaper, with Certificate of Deposit (CD) rates down from 7–7.25% three months earlier. The decline reflects abundant cash in the banking system, reducing the need for lenders to compete aggressively for market funding.

The key driver is $127.23 billion collected through Foreign Currency Non-Resident (Bank), or FCNR(B), deposits. Banks exchanged these dollars for rupees through swaps with the Reserve Bank of India. That added liquidity has reduced their dependence on CDs for everyday funding needs.

Large banks, which attracted substantial NRI deposits, are also using the cheaper funds to repay costlier existing borrowings. Their withdrawal from fresh CD issuance leaves investors with fewer opportunities to deploy money, adding downward pressure on rates. Smaller and mid-sized lenders gathered less FCNR(B) funding because their branch networks and international reach are more limited.

For those smaller lenders, issuing CDs now offers both cheaper funding and a chance to develop relationships with mutual funds and insurers. A broader investor base could help when liquidity tightens. The system’s cash surplus stands at about ₹10.31 lakh crore, and experts expect further additions as remaining swaps go through. Market watchers see CD rates remaining subdued for several more months.