IndusInd Bank fiasco prompts large state-run banks to tap CD market

Market sources indicated that the fiasco at IndusInd Bank may have prompted large state-owned banks to tap the CD market to raise funds for investing in IndusInd Bank's CDs

Following the disclosure that it had found discrepancies in its derivatives portfolio, IndusInd Bank has aggressively tapped the certificate of deposits (CD) market to raise funds amid a flight of deposits. In March, the bank raised Rs 16,550 crore in CDs at a coupon rate of 7.75-7.9 per cent. This is about five times higher than the average amount it has typically raised from the CD market previously.

 

Incidentally, many large state-owned banks, including Punjab National Bank (PNB), Bank of Baroda, Indian Bank, Canara Bank, Union Bank, and Bank of India raised large amounts of funds via CDs during this