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IndusInd Bank recently raised INR 11,000 crore by issuing certificates of deposit (CDs), as part of efforts to strengthen its funding position following an INR 2,000 crore accounting discrepancy in its derivatives portfolio. The Reserve Bank of India (RBI) had indicated over the past weekend that the private lender maintained sufficient capital despite potential impacts on its net worth. The bank's borrowing costs have risen by 15 basis points (bps) within a week, amid fears of a credit rating downgrade.
IndusInd Bank has recently raised INR 11,000 crore through the sale of certificates of deposit (CDs). With this, the bank sought to strengthen its funding position following a wave of deposit withdrawals triggered by the disclosure of an INR 2,000 crore accounting discrepancy in its derivatives book. Advertisement
This fundraising initiative is being viewed as a potential indicator of renewed investor confidence in the bank. The sentiment appears to have improved after the Reserve Bank of India (RBI) issued a statement over the past weekend affirming that IndusInd Bank continued to maintain adequate capital levels, despite a probable reduction in its net worth.
The CDs were issued across various maturities, with coupon rates ranging between 7.80% and 7.90%. This included INR 2,000 crore raised via 12-month CDs at a coupon rate of 7.90%. The bank's issuance represented more than 40% of the total INR 27,140 crore in CDs raised by all banks on the same day, according to data from the Clearing Corporation of India Limited (CCIL).
Compared to the previous week, the rates offered by IndusInd Bank reflected an increase of 15 basis points, based on CCIL data. Earlier this month, on 10 March, the lender had raised INR 1,890 crore through 12-month CDs at a lower coupon rate of 7.75%.
In a parallel development, the Reserve Bank of India has instructed IndusInd Bank to propose external candidates for the roles of Chief Executive Officer (CEO) and Chief Operating Officer (COO). This directive follows the RBI's decision to extend the tenure of the incumbent CEO by only one year, against the bank's request for a three-year extension.
The RBI's assurance regarding the bank's capital adequacy has played a key role in stabilising investor sentiment. However, the rise in borrowing costs and the continued lack of secondary market bond activity highlight the underlying concerns that persist.
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