IndusInd Bank has transferred corporate loans worth thousands of crores to other banks to ensure it has enough cash on hand. This comes at a time when the bank is facing an investigation into possible accounting mistakes that could reduce its total worth by ₹2,000 crore.
According to sources, the bank is worried that depositors may withdraw their money due to these financial issues. To prepare for this, IndusInd Bank has sold some of its high-quality loans to other banks, including ICICI Bank and Federal Bank, in exchange for cash. These transactions were done through a financial system called the Inter-Bank Participation Certificate (IBPC) market, where banks lend and borrow money from each other using loans as security.
How IndusInd Bank is Managing Its Cash Flow
Banks use IBPC when they need short-term liquidity (cash availability). In this system:
- A bank (IndusInd Bank, in this case) transfers a loan to another bank for a limited time (usually six months).
- In return, IndusInd Bank receives 40% of the loan amount as cash immediately.
- After six months, IndusInd Bank buys back the loan by returning the money along with interest.
For example, if IndusInd Bank transfers ₹1,000 crore in loans, it will get ₹400 crore in cash immediately. This money can help cover deposit withdrawals or any urgent financial needs. In return, IndusInd pays interest to the bank that temporarily holds the loan.
Sources say IndusInd Bank has transferred about ₹6,000 crore worth of loans to other banks this month, reducing its loan assets but gaining cash liquidity. Market experts believe that the Reserve Bank of India (RBI) may have advised IndusInd Bank to keep extra cash ready, in case customers start withdrawing deposits due to the financial investigation.
Why Other Banks Are Involved
For banks like ICICI Bank and Federal Bank, this is a profitable deal. They get highly rated loans for a short time and earn interest (between 7.5% and 8%). However, some banks refused to participate because they wanted a higher interest rate—around 8.5%, which IndusInd Bank was not willing to pay.
IndusInd Bank’s Financial Troubles and Market Impact
IndusInd Bank is currently under scrutiny due to a ₹1,600 crore potential loss from internal trades that may not have followed proper regulations. After this news broke on March 10, the bank’s share price fell sharply by 28%, from ₹900 to ₹650 in just a few days.
Forensic Audit and Future Outlook
To investigate the issue, IndusInd Bank’s board has hired Grant Thornton Bharat, a forensic auditing firm, to check its financial transactions. The bank’s upcoming quarterly financial results will give a clearer picture of:
- How much money it has lost due to these issues.
- Whether it has lost depositors’ money after March 10.
- Its plans to recover financially.
So far, IndusInd Bank, ICICI Bank, and Federal Bank have not commented on these transactions.
As the situation unfolds, banking experts and investors will closely watch how IndusInd Bank manages its cash, stabilizes its business, and rebuilds trust among customers and investors.
