PSU banks likely subscribed Rs 12,850 crore of CDs issued by IndusInd Bank on March 17

IndusInd Bank

State-owned banks are said to have subscribed to the bulk of the Rs 12,850-crore worth of certificates of deposits (CD) issued by the IndusInd Bank on March 17, market participants told Moneycontrol.

While state-owned banks bought most of the CDs, the remaining were picked by mutual funds, sources said.

CDs are issued by scheduled commercial banks and selected financial institutions to individuals, corporations, companies, and funds, among others usually to shore up the deposit base of the bank. IndusInd Bank’s deposit base could have had an impact due to discrepancies in certain derivative trades revealed by the bank recently, experts says.

This issuance indicates that the investors have drawn comfort from the Reserve Bank of India’s (RBI) assurance over financial position of the bank.

According to the Clearing Corporation of India’s (CCIL) data, IndusInd Bank raised Rs 11,000 crore worth of CDs on March 11 and Rs 1,850 crore on March 10.

CDs issued by the bank on March 17 have the maturities ranging between June and September and March 11 CDs have a maturity of one year.

Yield on the CD issued on March 17 remained in the range of 7.8-7.9 percent and those on March 10 7.75 percent, CCIL data shows.

On March 15, the Reserve Bank of India said IndusInd bank remains "well-capitalised and the financially position remains satisfactory". The statement followed concerns arising from recent developments at the Mumbai-headquartered private lender.

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.

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.