IndusInd Bank, a private sector bank, announced on Wednesday to raise up to ₹30,000 crore. This will be done in two parts:
- ₹10,000 crore will be raised by issuing shares or other financial instruments like ADRs (American Depository Receipts), GDRs (Global Depository Receipts), and QIPs (Qualified Institutional Placements).
- ₹20,000 crore will be raised by taking loans or issuing debt instruments (like bonds) to private investors, either within India or in foreign currency.
This fundraising plan still needs necessary approvals before it can begin.
At the same time, the Reserve Bank of India (RBI) has allowed the Hinduja Group, which owns about 15.8% of the bank, the main owner (promoter) of the bank , can now choose two people to be part of the bank’s board of directors (earlier they had only one). These would be non-executive and non-independent directors (meaning they are not part of the bank’s daily operations).
But this change will only happen if the Reserve Bank of India (RBI) and the bank’s shareholders approve it. The RBI is also changing its internal rules (Articles of Association) to make this possible.
Why IndusInd Bank is Raising Money?
IndusInd Bank is planning to raise capital in response to a serious financial and governance crisis, not just for growth but to strengthen its finances after a difficult few months, including:
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An accounting error related to derivative trading.
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A huge quarterly loss of ₹2,329 crore (a 200% drop compared to last year). Earlier this year, the bank suffered a major financial setback due to problems in its derivatives and microfinance portfolios.
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A loss of investor trust, which caused the share price to fall 27% in one day.
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The resignation of the CEO, Sumanth Kathpalia. Right now, a group of top executives is running the bank.
IndusInd Bank is recovering from recent problems, including a major loss and leadership exit. This money will help the bank strengthen its financial position and support future growth.