IndusInd Bank raised ₹11,000 crore on Monday by selling certificates of deposit (CDs) to strengthen its financial position. This move comes in response to recent deposit withdrawals following the bank’s disclosure of a ₹2,000 crore accounting discrepancy in its derivatives book.
Investor Confidence Restored
The successful fundraising indicates a possible return of investor confidence, especially after the Reserve Bank of India (RBI) reassured that IndusInd Bank remains well-capitalized despite the expected impact on its net worth. The bank issued CDs with maturities ranging from three months to one year, priced between 7.80% and 7.90%, as per data from the Clearing Corporation of India (CCIL).
While IndusInd Bank raised funds at a slightly higher rate than some of its peers, the fact that it managed to secure ₹11,000 crore in a single day signals investor confidence. Market experts believe this was driven by the RBI’s assurance that the bank’s financial health remains stable.
Impact of Accounting Discrepancy
The fundraising effort comes in the wake of a sharp 27% drop in IndusInd Bank’s share price last Tuesday. This decline followed the bank’s revelation that accounting lapses in its derivatives book could reduce its net worth by 2.3% as of December 31, 2024.
There were concerns about the bank’s ability to raise capital, especially considering that nearly 50.8% of the Hinduja Group’s 16.29% stake in the bank is pledged. However, the successful CD issuance has helped ease some of these concerns.
Large Share in CD Market
The ₹11,000 crore raised by IndusInd Bank accounted for over 40% of the total ₹27,140 crore raised through CDs by all banks on Monday, according to CCIL data. Some banks may have even raised funds specifically to invest in IndusInd Bank’s CDs, as per money market sources.
For comparison, IndusInd Bank’s one-year CDs were priced at 7.90%, higher than Axis Bank’s 7.62% for the same maturity. Despite the higher pricing, experts highlight that raising such a significant liquidity buffer in a single day is a positive sign for the bank.
RBI’s Oversight and Future Steps
On March 10, the day IndusInd Bank disclosed its accounting lapses, it had raised ₹1,850 crore via one-year CDs at 7.75%. Interestingly, there were no trades of IndusInd Bank bonds in the secondary market, indicating that investors preferred direct investments in the bank’s newly issued CDs.
The RBI has directed IndusInd Bank to complete remedial actions in the current quarter and ensure full disclosure to stakeholders. The bank has already announced the hiring of an external audit team to review its systems and address the issues raised.
