RBI governor Shaktikanta Das expressed concern about deposit growth of banks, with household savings moving towards alternative investment avenues.

He also warned that the banking system may be exposed to structural liquidity challenges since banks are now taking recourse to short-term non-retail deposits and other instruments of liability.

Credit growth at 14 per cent has outpaced deposit growth at 11.3 per cent, according to the RBI.

Banks have stopped raising their term deposit rates and are now taking recourse to certificate of deposits (CDs).

So far in 2024-25, CD issuances amounted to ₹3.2 lakh crore compared with ₹1.9 lakh crore in the corresponding period of 2023-24.

CD is a negotiable money market instrument and issued in a dematerialised form or as a Usance Promissory Note against funds deposited at a bank or other eligible financial institution for a specified time period.

Das pointed out that alternative investment modes are becoming more popular among retail customers and banks are facing challenges on the funding front with bank deposits trailing loan growth.

As a result of this trend, the lenders are giving more importance to short-term deposits garnered from non-retail customers and other instruments. This, he warned, could expose the system to structural liquidity issues.