Mumbai, June 26 -- Certificate of Deposits (CD) is a money market instrument issued by banks to meet their short-term funding requirement. However, in the recent period it was in focus due to higher issuances accompanied by robust credit growth and a lagging deposit growth.

An article in the June RBI Bulletin examines the market microstructure of certificates of deposit (CDs) in India, including issuers and investors profile and assesses the potential drivers of CD issuances.

Credit growth and tight liquidity conditions are found to enhance CD issuances, while market volatility and current and expected increase in interest rates dampen CD issuances.

Public sector banks (PSBs) rely on CD issuances more than private sector banks. On the ...