IndusInd raises Rs 11,000 crore via CDs in confidence boost

Mumbai: IndusInd Bank raised ?11,000 crore selling certificates of deposit (CDs) on Monday, as the lender moved to shore up its funding position amid deposit withdrawals after it revealed a ?2,000 crore accounting discrepancy in its derivatives book.

The fundraising suggests a likely return of investor confidence in the bank after the Reserve Bank of India on Saturday said the private lender has sufficient capital despite a likely hit on its net worth.

The bank issued CDs across six maturities spread across three months to one year. These CDs were priced in the range of 7.80-7.90%, according to data available at Clearing Corporation of India (CCIL).

Although the bank raised money at a slightly higher rate compared with its peers, the fact that it mobilised ?11,000 crore on a single day indicated that investors have drawn comfort from the RBI's assurance that the "bank is well-capitalised" and its financial position "remains satisfactory", market experts said.

Agencies

The statement from the RBI came in the backdrop of a 27% fall in the bank's share price Tuesday, a day after the Hinduja Group-promoted lender revealed that accounting lapses in the derivative books could impact its net worth by 2.3% as of December 31, 2024.

The fundraising has also allayed investors' concerns about IndusInd's ability to raise funds, given that nearly 50.8% of the promoter's stake has been pledged. The Hinduja Group has a 16.29% stake in the bank.

The quantum of CDs raised by IndusInd was more than 40% of the total CDs raised by all banks on Monday. According to CCIL data, banks issued CDs worth ?27,140 crore on Monday.

Some other banks may have issued CDs on Monday to raise money to invest in IndusInd's CD, said money market sources.

IndusInd's one-year CDs were priced at 7.90%, as against 7.62% by Axis Bank for the same maturity, the CCIL data show.

Although the CDs were priced higher, the pertinent issue is that the bank could create a liquidity buffer of ?11,000 crore in a single day, said the treasury head of private bank. On March 10, the day it disclosed to exchanges about account lapses in the derivatives book, the bank had raised ?1,850 crore via one-year CDs at 7.75%.

Interestingly, there were no trades of IndusInd bonds in the secondary market, reflecting investors' preference to invest directly in the primary market.

On Saturday, while citing the bank's announcement of hiring an external audit team to review its systems, the RBI directed IndusInd to have remedial actions completed fully during the current quarter after making required disclosures to all stakeholders.