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Informist, Wednesday, Jan. 14, 2026

 

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--Indian Overseas Bank: Global NIM 3.32% as on Dec 31 vs 3.21% quarter ago
--CONTEXT: Comments by Indian Overseas Bank mgmt in post-earnings press meet
--Indian Overseas Bank: Made INR 15 bln provision for expected credit loss
--Indian Overseas Bank: Got all nods to raise INR 40 bln from market by Mar
--Indian Overseas Bank:Govt stake in bank may fall by 4% post INR 40-bln QIP
--Indian Overseas Bank: Difficult to cut govt stake to 75% by Aug 1 deadline
--Indian Overseas Bank: To meet recovery target for FY26
--Indian Overseas Bank: US tariffs may have adverse impact on MSMEs in FY27
--Indian Overseas Bank: Hope to start branch in GIFT IFSC by December
--Indian Overseas Bk:Hope to maintain FY26 India NIM at 3.4%, global at 3.32%

 

By Shweta and Sunil Raghu

 

MUMBAI/AHMEDABAD – State-owned lender Indian Overseas Bank is unlikely to be able to bring the government's stake in the bank below 75% by Aug. 1, according to the bank's management. The Union finance ministry had asked five public-sector banks, in which public shareholding is below 25%, to increase it to 25% by Aug. 1. This is in line with the Securities Contract (Regulation) Rules issued by the Securities and Exchange Board of India, which mandate that all listed companies, including in the public sector, must have a minimum public shareholding of 25%.

 

"The government holds 92.4% stake in the public-sector bank," Managing Director and Chief Executive Officer Ajay Kumar Srivastava told a press conference after the bank had detailed its earnings for the December quarter. "It will be difficult before August 2026 to raise that money and bring the shareholding below 75%."

 

Indian Overseas Bank's net profit for the December quarter rose 56% on year to INR 13.65 billion because of a sharp fall in tax outgo despite a rise in provisions. The bank's tax outgo dropped sharply as it opted for the lower tax rate regime. The lender's net interest income for the quarter rose 18% on year to nearly INR 33 billion and total income rose 15% on year and nearly 5% on quarter to INR 96.72 billion.

 

The government currently plans to raise INR 40 billion through a qualified institutional placement in Indian Overseas Bank by March. This, however, will only lower its holding in the bank by 4%, Srivastava pointed out.

 

The management said it remains confident of maintaining the bank's domestic net interest margin at 3.42% and global net interest margin at 3.32% for the financial year 2025-26 (Apr-Mar). Earlier in the day, the bank had reported a sequential rise of 7 basis points in its domestic net interest margin to 3.42% for the December quarter and 11 bps in global net interest margin to 3.32%.

 

"In the last meeting I suggested that around 3.3% to 3.4% (net interest margin) we are going to maintain, and that is a very good level to maintain," Srivastava said. "Going forward also, we would like to maintain at this level, 3.32% for global and 3.42% for domestic."

 

The state-owned lender's business mix, which includes retail, agriculture and micro, small, and medium enterprise advances, rose 18.7% to INR 6.44 trillion in the December quarter. "For the first time in IOB's history, year-on-year growth in absolute terms in the business mix, we have grown by more than INR 1 lakh crore (INR 1.01 trillion)," Srivastava said.

 

The bank made a forward-looking provision of INR 15 billion during the December quarter for the Reserve Bank of India's expected credit loss norms, which will come into effect in April 2027. "As per our calculations in the month of September, this ECL provision additional requirement was around INR 2,600 crore (INR 26 billion), which has come down in the December quarter to INR 2,200 crores (INR 22 billion)," the managing director said.

 

The bank has "made INR 1,500 crores (INR 15 billion) of additional provision in the name of ECL separately in the balance sheet. And the balance INR 1,000 crores (INR 10 billion), going forward, every quarter we are going to add to that kitty to ensure" the preparedness in "one go". This INR 15 billion provision "was almost 65% of the requirement we have already provided upfront in this balance sheet", according to the bank's management.

 

The bank's total slippage during the December quarter rose 6% on year to INR 3.01 billion from INR 2.90 billion in the September quarter and INR 2.80 billion a year ago. "Fresh slippages are happening in every quarter," Srivastava said. "(But) ...there was no slippage from corporate side for the entire year." The slippage ratio has been maintained at 0.11% on year. Slippage refers to loans turning into non-performing assets in a given period.

 

In the last week of December, the bank received the Reserve Bank of India's permission to set up a branch in the International Financial Services Centre at Gujarat International Fin-Tec City. "It will take around six to nine months (to set up). So by third quarter, Q3, I think, we should be ... able to open it," he said.

 

Indian goods exported to the US face a steep 50% tariff. Srivastava, as a banker and lender to many micro, small, and medium enterprises, said these enterprises have been managing the impact so far based on "short-term arrangements or based on mutual understanding between exporters and importers, but with the hope that it will get over soon. But if it continues to move forward, I think the next financial year, some adverse impact will be visible."

 

The bank has achieved about 60% of its FY26 recovery target in the first nine months of the fiscal year. Asked about a possible change to the target, the managing director said, "Q4 (March quarter) is the most active and the busiest quarter of the entire financial year... We are pretty sure that in this quarter, minus 40% we will be able to recover. There are many pipelines and things will happen. That is what we are targeting."

 

Wednesday, shares of the bank closed at INR 36.10 on the National Stock Exchange, up nearly 2%.  End

 

Edited by Rajeev Pai

 

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