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 reached ₹5.60 lakh crore as of 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 how fluctuations in Certificate of Deposit (CD) markets and system liquidity influence the transmission of monetary policy and bank funding costs in India.
Dimensions to cover in your answer
- Liquidity volatility: Impact of currency-swapping activities on domestic rupee liquidity
- Funding cost dynamics: Correlation between CD market contraction and short-term interest rate volatility
- Monetary transmission: Challenges in maintaining stable interest rate corridors during liquidity peaks
Keywords: Liquidity Management · Monetary Policy Transmission · Certificate of Deposit · Systemic Liquidity · Funding Costs
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