Outstanding CDs fell by ₹1.306 lakh crore as year-on-year growth slowed to 11.5%
GS3Economy · S&T · Environment · Security· Monetary policy, RBI & banking· Prelims·
Liquidity management and banking sector dynamics: a relevant GS3 Economy topic.
Why in news
RBI data revealed a significant decline in outstanding Certificates of Deposit (CDs) to ₹5.60 lakh crore by September 15, reflecting a slowdown in year-on-year growth.
Background
Outstanding CDs fell by ₹1.306 lakh crore from mid-August (₹6.90 lakh crore) to September 15 (₹5.60 lakh crore). System liquidity peaked at ₹11.2 lakh crore in early September due to banks swapping dollars for rupees.
Facts for Prelims
- FactOutstanding CDs fell to ₹5.60 lakh crore by September 15.
- FactYear-on-year growth of outstanding CDs slowed to 11.5%.
- FactSystem liquidity peaked at ₹11.2 lakh crore in early September.
Prelims practice question
What was the peak system liquidity recorded in early September?
- (a)₹9.8 lakh crore
- (b)₹15.0 lakh crore
- (c)₹13.5 lakh crore
- (d)₹11.2 lakh crore
Show answer
Answer: (d) ₹11.2 lakh crore — The note states that system liquidity peaked at ₹11.2 lakh crore in early September.
For Mains
Q. Analyze the role of Certificates of Deposit in managing systemic liquidity and the implications of fluctuating CD volumes on short-term interest rates.
Dimensions to cover in your answer
- Liquidity management: Impact of dollar-rupee swaps on domestic system liquidity peaks
- Funding cost dynamics: Correlation between declining CD volumes and short-term borrowing costs for commercial banks
Keywords: Systemic Liquidity · Certificates of Deposit · Monetary Policy · Interest Rate Volatility · Banking Sector
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