India's IndusInd Bank received $2 billion in higher-cost bulk deposits in March, its largest monthly haul in at least two years, as the lender strengthened its funding base after disclosing accounting errors.
Earlier this month, the country's fifth-largest private sector bank reported a $175 million hole in its balance sheet, citing accounting discrepancies in its derivatives portfolio.
The discrepancies have raised concerns about the bank's governance, prompting Grant Thornton to conduct a forensic review of the accounting lapses. Since the lender disclosed the matter, the bank's shares have fallen by nearly 27%.
According to publicly available data from India's clearing house, IndusInd Bank raised Rs 16,550 crore ($1.93 billion) in March by selling certificates of deposits (CDs) maturing in three months to one year, with approximately 85% of that raised after the lapses were disclosed.
It paid 7.90 percent on one-year CDs this month, which was 20 basis points higher than what it paid for similar deposits in February, according to the data.
"By issuing CDs, the bank may want to shore up its overall deposit base and maintain higher liquidity to counter uncertainty on deposit withdrawals," says Karthik Srinivasan, senior vice president and group head at rating agency ICRA.
"It is also a confidence building exercise to ensure that the bank's liquidity remains strong."
According to an IndusInd spokesperson, the bank "evaluates various sources of funds depending on its asset and liability requirements" and maintains a "healthy liquidity position" with a focus on retail deposit mobilisation.
The Reserve Bank of India (RBI), the country's central bank, stated this month that IndusInd Bank was well capitalized and its financial position remained "satisfactory".
Less Preferred Option
Bulk deposits - those greater than Rs 3 crore - are generally less attractive to Indian lenders than retail deposits because they cost 20-150 basis points more.
However, IndusInd Bank raised nearly 3.5 times as much through bulk deposits in March as it did the previous month, marking its highest haul since at least April 2023, according to clearinghouse data.
IndusInd Bank's monthly increase in such deposits is also significantly higher than the banking industry's average of 40%.
The RBI asked some state-run and private-sector banks to subscribe to IndusInd Bank's bulk deposit CDs, according to reports.
According to the most recent data available, IndusInd Bank's total deposit base was Rs 4.09 trillion as of December 2024, with retail deposits accounting for 46%.
