SBI likely the top investor in IndusInd Bank’s CDs

IndusInd Bank

State Bank of India (SBI), the country’s largest lender by assets, is likely the biggest investor in Rs 12,850-crore worth of certificates of deposits (CDs) issued by IndusInd Bank on March 17, sources have told Moneycontrol.

Attractive yields on these papers and assurance given by the Reserve Bank of India (RBI) helped boost investor confidence in IndusInd Bank’s paper, sources said.

Moneycontrol reported on March 18 that state-owned banks subscribed to the bulk of IndusInd Bank’s CDs on March 17.

The weighted average yield on the IndusInd Bank’s CDs was 10-15 basis points (bps) higher than those of other private and state-owned banks issued this month, CCIL data shows.

One basis point is one-hundredth of a percentage point.

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

While state-owned banks bought most of the CDs on March 18, the remaining were picked by mutual funds, sources said.

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 Mumbai-headquartered 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.

IndusInd Bank’s deposit base could have had an impact due to discrepancies in the derivative trades, experts say.