IndusInd Bank raises $2 billion in higher-cost bulk deposits in March

India's IndusInd Bank garnered $2 billion in higher-cost bulk deposits in March, its biggest monthly haul in at least two years, as the lender shored up its funding base after disclosing accounting lapses.

The country's fifth-largest private sector bank flagged earlier in the month a $175 million hole in its balance sheet, citing accounting discrepancies in its derivatives portfolio.

The discrepancies have led to concerns over governance at the bank and the appointment of Grant Thornton to conduct a forensic review into the accounting lapses. The bank's shares are down nearly 27 per cent since the lender disclosed the matter.

Publicly available data from India's clearing house showed that IndusInd Bank raised Rs 16,550 crore ($1.93 billion) in March through the sale of certificates of deposits (CDs) maturing in three months to one year, with about 85 per cent of that raised after the lapses were disclosed.

It paid 7.90 per cent on its one-year CDs this month, 20 basis points higher than what it had paid for similar deposits in February, the data showed.

"By issuing CDs, the bank may want to shore up its overall deposit base and maintain higher liquidity to counter uncertainty on deposit withdrawals," Karthik Srinivasan, senior vice president & group head at rating agency ICRA, said.

"It is also a confidence building exercise to ensure that the bank's liquidity remains strong."

An IndusInd spokesperson said the bank "evaluates various sources of funds depending on its asset and liability requirements" and that it has a "healthy liquidity position" with a focus on retail deposit mobilisation.

The Reserve Bank of India (RBI), the country's central bank, said this month IndusInd Bank was well capitalised and its financial position remained "satisfactory".

Less Preferred Option

For lenders in India, bulk deposits - those that are more than Rs 3 crore - are generally less preferable to retail deposits as they cost around 20-150 basis points more.

But IndusInd Bank raised through bulk deposits in March nearly 3.5 times what it raised in the preceding month, marking its highest haul since at least April 2023, the clearing house data showed.

The on-month jump in such deposits raised by IndusInd Bank is also way above the 40 per cent average increase for the banking industry.

RBI asked some state-run and private-sector banks to subscribe to IndusInd Bank's bulk deposit CDs, two sources from banks that have subscribed to these instruments said.

The central bank did not immediately reply to a Reuters email seeking comment.

The sources requested anonymity as they are not authorised to speak to media.

IndusInd Bank had an overall deposit base of Rs 4.09 trillion as of December 2024 of which retail deposits accounted for 46 per cent, according to its latest available data.