Short-term borrowing costs for Indian lenders climbed most in a month after the nation’s central bank said it would end its overseas deposit facility early, taking away a cheaper and more stable source of funding.Rates on three-month certificates of deposit rose 16 basis points to 6.59 per cent on Thursday, the most since July 14, data compiled by Bloomberg show. The six-month rate is headed for its steepest weekly gain since July 10. CDs are debt instruments that mature within one year. The Reserve Bank of India surprised markets last week by announcing it would close a special dollar deposit window for overseas residents on Aug. 31, after the facility drew more than $50 billion. Lenders had been using these deposits to fund robust loan growth and replace the more expensive CDs.Money-market rates will rise another 5 basis points before stabilising, said Anshul Chandak, head of treasury at Emirates NBD-backed RBL Bank Ltd. “We expect CD issuances to pick up, albeit after a lag.”The strong foreign deposit inflows had reduced CD issuance. Banks sold ₹57,120 crore ($6 billion) of short-term debt in the fortnight ended July 31, down from around 1 trillion in the first 15 days of June, according to RBI data.Domestic banks have relied on CDs to fund loan demand because term deposits haven’t kept pace, as households shift savings into other investments. Bank loans grew 19.3 per cent in the year through July 31 — the highest since May 2024 — compared with 15.4 per cent growth in deposits, central bank data show. The central bank on June 5 announced that it would fully bear the hedging costs on foreign currency deposits, allowing banks to offer attractive rates on such savings. The special window became operational on June 8.More stories like this are available on bloomberg.comPublished on August 21, 2026