Short-term CD, CP Rates Fall 50-65 Bps For Top Indian Entities
Short-term borrowing rates are on a downward trajectory, aided by a liquidity surplus created through RBI’s OMOs and FX swaps, as well as muted credit demand in early financial quarter
Short-term CD, CP Rates Fall 50-65 Bps For Top Indian Entities
The drop in CD and CP rates—by as much as 50–65 basis points—signals relief for top-rated borrowers and could lead to broader lending rate reductions. While the US Fed’s earlier rate cuts drove global momentum, its slower pace in 2025 may bring stability
There is 50-65 bps drop in short-term Certificate of deposit (CD), Commercial paper (CP) for top credit rated entities. Interestingly, US Treasury 10 year has inched up from 4.15 to 4.22 as of now. Looking at the development from the Federal Reserve perspective, one finds that interest rates on certificates of deposit play an important role for some savers. CDs’ fixed rates can offer guaranteed returns for several months or years, and locking in a high CD rate can mean earning strong yields even if the economy enters a low-rate environment.
CD rates have been falling slowly in 2025 – but there’s some uncertainty on what rates will do next. Both national average and high-yield CD rates began to noticeably drop around September 2024, which is when the Federal Reserve began lowering its federal funds rate. However, the Fed is expected to slow down rate cuts in 2025, which will keep CD rates more steady. Some current political and economic events may impact inflation, though, making the near future of rate movements harder to predict.
Talking to Bizz Buzz, MV Hariharan, ex-treasury head, SBI said, “This week, CD rates in India are generally trending downwards, with some banks offering high-yield CDs, but overall, rates have been decreasing since the Federal Reserve's rate cuts in September 2024.” The Reserve Bank of India (RBI) has been taking measures to boost liquidity in the banking system, including open market operations (OMOs) and foreign exchange (FX) swaps.
These liquidity injections are expected to lower short-term borrowing costs for banks, including the rates on instruments like CDs and commercial papers (CPs).
Lower CD rates can lead to reduced lending rates for businesses and individuals, as banks can borrow at cheaper rates, which in turn, can stimulate economic activity.
Madhavan Kutty, chief economist, Canara Bank said, “Liquidity has turned into surplus, because of OMOs and FX swaps. Also, the year end rush is no more there now.” Also, first quarter of a financial year is a lean season for credit, so fund requirement is lower.
