The mainland's top banks are expected to win approval to issue tens of billions of yuan in negotiable certificates of deposit (NCDs) as early as next month, in another step towards developing market-determined interest rates. NCDs would enable banks to raise large amounts of funds at relatively stable costs, providing an alternative to borrowing from the interbank market, where the cost of funds can be volatile - as seen in June, when a liquidity squeeze briefly sent short-term money market rates to nearly 30 per cent. Bank of China, Industrial and Commercial Bank of China, Agricultural Bank of China, China Construction Bank and Bank of Communications had submitted their plans for NCDs to the central bank, people familiar with the development said. The NCDs, large-denomination certificates of deposit tradeable on the interbank market, would be offered with maturities from three to six months and be priced at a premium over the Shanghai interbank offered rate (Shibor), the sources said. Each bank was planning to issue NCDs worth more than 10 billion yuan (HK$12.6 billion), one of the sources said. "The instrument could be rolled out soon, which not only opens up a liquidity channel for banks, but also pushes forward interest rate reforms by gradually loosening controls on deposit rates," a source close to the banking regulator said. The People's Bank of China (PBOC) could give its approval as early as next month, according to the sources, who all requested anonymity owing to the sensitivity of the issue. The central bank, under the leadership of Zhou Xiaochuan, has been trying to promote the Shibor's role as the benchmark for short-term borrowing costs. The PBOC has taken a step-by-step approach in liberalising interest rates, freeing up bank lending rates last month. That decision to remove the floor on bank lending rates was seen as a largely symbolic prelude to removing caps on deposit rates. The introduction of NCDs may have limited immediate impact on money market rates, which are already moving in line with market supply and demand, but the pilot is widely seen as heralding the eventual dismantling of controls on bank deposit rates.