Mumbai, March 4 -- Liquidity buffers of banks are expected to come under stress in the March quarter as large volumes of short-term certificates of deposit (CDs) raised in recent months mature in March, analysts said.

Market participants said banks leaned heavily on CDs in December and even more in January to shore up liquidity amid tight funding conditions and sluggish retail deposit growth. Certificates of deposit are short-term borrowing instruments with maturities ranging from 7 days to one year, through which banks raise funds from institutions by offering higher interest rates than those paid to retail depositors.

However, as these instruments fall due, repayments will cause a dip in current liquidity ratios.

"CDs outstanding for...