New Delhi: Indian Overseas Bank (IOB) has received a major credit rating upgrade from India Ratings & Research (Ind-Ra), with its Long-Term Issuer Rating and Basel III Tier 2 Bonds upgraded to IND AA+/Stable from IND AA on October 5, 2026. The upgrade reflects the bank’s improved asset quality, stronger profitability, comfortable capitalisation and stable deposit base.
Announcing the rating action from Chennai on October 5, 2026, the rating agency also revised the outlook from Positive to Stable. The assessment takes into account IOB’s improving financial performance and continued support from the Government of India, which holds a 92.44% stake in the bank.
India Ratings Upgrades IOB’s Long-Term Rating and Tier 2 Bonds
India Ratings & Research upgraded the following ratings of Indian Overseas Bank:
- Long-Term Issuer Rating: Upgraded to IND AA+/Stable from IND AA.
- Basel III Tier 2 Bonds: Upgraded to IND AA+/Stable from IND AA.
- Rating outlook: Revised from Positive to Stable.
The upgrade reflects the improvement in the bank’s financial and operational indicators, particularly its asset quality, profitability and capital position. The agency also considered the bank’s systemic importance and the continued support it receives from the Government of India.
Read also: Indian Overseas Bank Pays ₹45.40 Crore Annual Interest on ₹500 Crore Basel III Tier-II Bonds
Improved Asset Quality Supports IOB Rating Upgrade
Improving asset quality was one of the key factors behind the rating upgrade. Indian Overseas Bank reported a Gross Non-Performing Asset (GNPA) ratio of 1.33%, while its Net Non-Performing Asset (NNPA) ratio stood at just 0.18%.
These figures indicate an improvement in the bank’s loan portfolio quality and a low level of net stressed assets. Better asset quality can also help reduce the pressure of bad-loan provisions and support more stable financial performance.
IOB Reports Strong Profitability and Comfortable Capital Position
The rating agency also highlighted IOB’s profitability and capitalisation as important strengths.
The bank’s Return on Assets (ROA) improved to 1.41% in the first quarter of FY2026-27 (Q1 FY27). The indicator reflects the bank’s ability to generate earnings from its asset base.
IOB’s capital position remained comfortable, with its Common Equity Tier 1 (CET1) ratio at 16.88% and overall Capital Adequacy Ratio (CAR) at 19.36%.
The key financial indicators cited by India Ratings are:
- Gross NPA Ratio: 1.33%
- Net NPA Ratio: 0.18%
- Return on Assets (ROA): 1.41%
- Common Equity Tier 1 (CET1) Ratio: 16.88%
- Capital Adequacy Ratio (CAR): 19.36%
- CASA Ratio: 41.05%
- Retail Deposits as a Share of Total Deposits: Approximately 94%
The combination of improved profitability, stronger asset quality and adequate capital buffers supported the positive rating action.
Stable Deposit Base Strengthens IOB’s Financial Profile
Indian Overseas Bank’s liability franchise was another factor considered in the rating assessment. Retail deposits account for approximately 94% of the bank’s total deposits, indicating a substantial retail funding base.
The bank’s Current Account Savings Account (CASA) ratio stood at 41.05%. A stable deposit base is an important factor for banks because it supports funding requirements and helps maintain liquidity.
Together, the retail deposit share and CASA ratio highlight the role of customer deposits in supporting IOB’s funding profile.
Government of India Support Remains a Key Rating Factor
The Government of India holds a 92.44% stake in Indian Overseas Bank. According to the rating assessment, continued government support remains an important consideration because of the bank’s systemic importance.
The combination of government ownership, improving financial indicators and a stronger capital position contributed to the upgraded ratings.
The move to IND AA+/Stable signals an improved credit assessment of the bank’s ability to meet its financial obligations, while the Stable outlook reflects the rating agency’s revised outlook assessment.
About Indian Overseas Bank
Indian Overseas Bank (IOB) is a public sector bank headquartered in Chennai, Tamil Nadu. Established in 1937, the bank provides a range of banking and financial services, including deposits, loans, digital banking and services for retail and corporate customers. The Government of India is its majority shareholder.
