IndusInd Bank’s CD yields 10-15 bps higher in secondary market amid uncertainty

IndusInd Bank

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Amid the uncertainty at IndusInd Bank after the derivatives portfolio lapses followed by the resignation of CEO and deputy CEO, the yield on the certificates of deposit of the lender surged 10-15 basis points since start of the fiscal in the secondary market.

This comes even as the traded volumes were sharply lower than other major private and state-owned banks.

Money market experts said the uncertainty over IndusInd Bank is leading to investors seeking higher yield in the secondary market. The CDs saw yield push higher as most investors were seeking exit before the maturity, given the uncertainty surrounding the bank.

According to data from the Clearing Corporation of India, the yield on IndusInd Bank CDs were in the range of 6.52-6.95 percent, as compared to 5.89-6.95 percent for private peers, and 5.70-6.70 percent for PSU banks. The traded volume of IndusInd Bank’s CD was Rs 680 crore as on May 7 in the secondary market.

Meanwhile, IndusInd Bank stayed absent from the primary market after mobilizing heavy funds in March. The lender had ramped up efforts to mobilise certificates of deposit in March to raise more than Rs 16,500 crore through CDs.

The bank commanded higher yield on CDs after they saw outflows from the deposit base. As per CRISIL’s report, the bank’s retail and small businesses deposits slipped to Rs 1.85 lakh crore in the March quarter from Rs 1.89 lakh crore in the previous quarter.

The uncertainty over IndusInd Bank started after the lender reported an accounting discrepancy in March related to its derivatives portfolio. This further led to findings of an external agency and Board-appointed independent professional firm to conclude an adverse accounting impact at Rs 1979 crore and Rs 1959.98 crore, respectively.

After this, bank’s CEO and managing director Sumant Kathpalia resigned on April 29, a day after, deputy CEO Arun Khurana quit.

Ratings agency Crisil has placed IndusInd Bank’s long-term debt instruments on “rating watch with negative implications”. Crisil placed the Rs 4,000-crore Tier II Bonds (Under Basel III) and Rs 1,500-crore infrastructure bonds at Crisil AA+/Watch Negative (placed on “rating watch with negative implications”), the release said.