Following the disclosure of disturbances found in derivative portfolio, the IndusInd Bank has used the Certificate of Deposit (CD) market aggressively to raise funds due to reduced deposits.
In March, the bank raised Rs 7.75 from CD and Rs 16,550 crore at 7.90 percent interest rate. This is five times more than the funds raised from the CD in normal state before this.
Many big government banks including Punjab National Bank, Bank of Baroda, Indian Bank, Canara Bank, Union Bank and Bank of India have also raised huge funds from CDs during this period.
Sources associated with the market said that the problem in IndusInd Bank would have motivated public sector banks to use the CD market to raise funds to invest in CDs. This will give them the facility of spreading the cost of borrowing.
Treasury official of a large bank said that most of the government banks have subscribed to IndusInd Bank CDs, as it had offered attractive yields. He said, “Everyone would like to invest in the rates offered on IndusInd CDs.” He said that the rates increased by 15 to 20 basis points within a week.
According to CCIL data, yield on PNB’s CD was 7.56 percent to 7.59 percent, Yield 7.55 to 7.60 percent on Bank of Baroda CD, while Yield on IndusInd Bank CD was 7.75 and 7.90 percent.
On March 10, IndusInd Bank raised Rs 1,890 crore from 12 months CDs at 7.75 percent coupon rate. On the same day, the bank revealed that in an internal review it has found discrepancies in derivatives portfolio, which had an adverse effect of 2.35 percent in its net worth.
First Published – March 31, 2025 | 11:14 pm IST