Days after incurring significant losses in its derivatives segment, IndusInd Bank raised ₹11,000 crore through the sale of certificates of deposits (CDs), according to a report by The Economic Times on Tuesday. This fundraising initiative is not only aimed at strengthening liquidity but also at restoring investor confidence.

The move follows the Reserve Bank of India’s (RBI) statement affirming that the country’s fifth-largest private bank maintains a satisfactory capital level. As per the ET report, IndusInd Bank issued certificates of deposits with maturities ranging from three months to one year.

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Citing data from the Clearing Corporation of India, the report highlighted that these CDs were priced between 7.80% and 7.90%, which is relatively higher than those issued by other banks. The higher rate indicates that the bank is willing to pay a premium to attract funds, likely to counter concerns raised by investors following recent financial setbacks.

By 12:00 PM, IndusInd Bank’s share price was trading at ₹677.90, reflecting a 0.07% increase from the previous close on the NSE.

Market Reaction and Investor Sentiment

The banking sector has been on high alert after IndusInd Bank’s recent accounting discrepancies came to light. Last week, the lender’s stock plummeted by 27% following the revelation of irregularities in its derivatives portfolio. This sharp decline wiped out a significant portion of the bank’s market capitalization, raising concerns among investors regarding governance and risk management practices.

The derivatives losses have sparked discussions about transparency and internal controls within private banks, especially those with exposure to complex financial instruments. Analysts suggest that IndusInd Bank’s move to raise ₹11,000 crore through CDs is a strategic decision to reassure stakeholders that the bank remains financially stable despite recent setbacks. The higher rates on CDs may indicate an effort to compensate for investor concerns by offering more attractive returns.

RBI’s Involvement and Leadership Changes

The Reserve Bank of India (RBI) has been closely monitoring the situation and has taken a proactive approach to ensure stability within the banking system. In a related development, the central bank has directed IndusInd Bank to consider external candidates for the positions of Chief Executive Officer (CEO) and Chief Operating Officer (COO).

This directive comes after the RBI decided to extend the tenure of the current CEO for only one year, instead of the three-year extension initially requested by the bank. This decision suggests that the regulator is keen on ensuring that leadership changes align with improved governance standards and risk management frameworks.

Industry experts believe that the RBI’s intervention reflects a broader effort to strengthen oversight of private sector banks and reinforce investor confidence. By recommending external candidates for key leadership roles, the central bank aims to bring fresh perspectives and enhance accountability within IndusInd Bank’s management team.

Future Outlook and Challenges

Despite the recent turmoil, IndusInd Bank remains a significant player in India’s banking sector. The success of its recent fundraising effort indicates that investors and financial institutions are still willing to back the bank, albeit at a higher cost. However, the lender faces several challenges, including restoring market confidence, addressing internal governance issues, and ensuring greater transparency in its financial disclosures.

Going forward, the bank’s ability to manage its liquidity effectively, maintain asset quality, and navigate regulatory scrutiny will play a crucial role in determining its long-term stability. Industry observers will also be closely watching how the leadership transition unfolds and whether the bank can implement stronger risk management measures to prevent similar incidents in the future.

For now, the ₹11,000 crore raised through CDs provides a temporary cushion, but sustained efforts will be required to rebuild trust and reinforce the bank’s position in the financial sector.