IndusInd Bank, HDFC Bank biggest issuers of CDs among private lenders this month

IndusInd Bank

IndusInd Bank and HDFC Bank have turned out to be biggest issuers of certificates of deposit (CDs) in private bank space, so far, in March.

IndusInd Bank was also leading in term of issuances of CDs this time despite the derivatives crisis at the bank. The Mumbai-headquartered bank has been raising heavy funds after its announcement early this month of unearthing accounting discrepancies in forex derivatives.

According to the Clearing Corporation of India’s (CCIL) data, IndusInd Bank and HDFC Bank have combined raised Rs 37,190 crore, so far, this month, which is almost 21.6 percent of the total issuances of Rs 1.72 lakh crore.

IndusInd Bank raised Rs 17,550 crore, which is 10.2 percent of total issuances, and HDFC Bank Rs 19,640 crore, 11.4 percent of the total issuance.

Usually, issuances of the CDs rises in March due to year-end funding demand and roll over of the papers due for maturities.

Due to tight liquidity conditions, most banks are opting for CD issuances, experts said.

For past few months, liquidity in the banking system has been under stress due to slower government spending, RBI's interventions in the foreign exchange market and heavy selling by foreign portfolio investors in Indian equities.

To tackle the cash shortage, the RBI has since late 2024 infused more than Rs 3 lakh crore worth of durable liquidity, tapping a combination of variable rate repo auctions (VRRs), swaps and open market operations (OMOs).

In response to deposit run amid derivatives fiasco, IndusInd Bank is raising heavy funds from the market, experts said.

Even after this, the weighted average yield on the IndusInd Bank’s CD was 10-15 basis points (bps) higher than the other private and state-owned banks' CDs issued so far this month. Experts attribute it to the assurance given by the Reserve Bank of India (RBI).

On March 15, the Reserve Bank of India said IndusInd Bank remains "well-capitalised and the financially position remains satisfactory".

According to the RBI, IndusInd Bank reported a Capital Adequacy Ratio of 16.46 percent and a Provision Coverage Ratio of 70.20 percent at the end of December quarter.

The bank also maintained a Liquidity Coverage Ratio (LCR) of 113 percent as of March 9, exceeding the regulatory requirement of 100 percent.

The statement followed concerns arising from recent developments at the bank. Last week, IndusInd Bank said it noted some discrepancies in its derivatives portfolio, which could result in a one-time loss of Rs 2,000 crore in the March quarter.

The discrepancies were unearthed during a review of its currency derivatives portfolio.

CDs are issued by scheduled commercial banks and selected financial institutions to individuals, corporations, companies and funds and others usually to shore up deposit base.