Banks have significantly ramped up their borrowing through certificates of deposit (CDs) to meet the surge in credit demand in March. According to data from CDSL, banks raised ₹2.25 lakh crore through CDs in March 2025, nearly double of the ₹1.26 lakh crore in the same month the previous year.Experts attribute this surge in CD borrowing to tighter liquidity conditions and slower deposit growth amid rising credit demand. Notably, IndusInd Bank borrowed over six times its usual CD amount to counter deposit outflows, raising ₹16,550 crore in March 2025, compared with ₹2,500 crore in the same month last year. "Issuances of CDs by banks have accelerated in March owing to year-end asset liability management," said Karan Gupta, head and director financial institutions, India Ratings. "We expect certificates of deposit issues to moderate in the June quarter owing to a sharp improvement in the liquidity conditions coupled with the seasonally generally soft demand for credit in the first quarter."Banking system has remained in deficit mode for the large part of March, despite the liquidity infusion by the RBI. Daily average liquidity deficit in March stood at ₹1.52 lakh crore.In the fortnight ending March 21, banks issued certificates of deposits worth ₹1.17 lakh crore, while in the fortnight ending March 7, they borrowed nearly ₹71,000 crore-up from ₹30,000 crore in the fortnight ending February 21. As per RBI data, as on March 21, 2025 banks had a total certificates of deposit outstanding of ₹5.3 lakh crore.Banks are also sourcing funds through certificates of deposit at a higher cost, with yields on certificates of deposits marginally increasing from 8.02% to 8.05% for the fortnight ending March 21. According to the Reserve Bank of India, the issuance of CDs grew by 34% on year to reach an all-time high of ₹10.58 lakh crore during FY25 (up to March 7, 2025). "This highest-ever outstanding certificate of deposits indicates an increasing liquidity shortage for banks," said Kaitav Shah, research analyst at brokerage house Anand Rathi. "The pace of addition picked up in the March quarter but has stabilised. Certificates of deposit rate follows repo rate moves tightly. Also, the certificates of deposit rate curve is inverse, and we expect this to reverse in April."