Credit Rating- Revision

Ref No. IRC/147/2026-27 05.10.2026 BSE Limited, National Stock Exchange of India Ltd., Floor 1, P.J. Towers, Dalal Street, Exchange Plaza, C-1 Block G, Mumbai 400 001 Bandra-Kurla Complex, Bandra (E), Mumbai – 400 051 BSE SCRIP CODE: 532388 NSE SCRIP CODE: IOB Madam/Sir, Rating Action by India Ratings & Research Rating upgraded to ‘INDAA+/Stable’ Pursuant to Regulation 30(6) and Regulation 55, read with Point 3 of Para A of Part A of Schedule III of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, we hereby inform that India Ratings & Research Limited has upgraded the credit rating and outlook assigned to the Bank’s Non-Convertible Debt Securities & Long-term Issuer Rating of the Bank as follows: Name of Date of Verification Credit Credit Date of ISIN Rating/ Outlook Status of Rating Rating Verification Agency (Review) INE565A08035 (Basel III Tier II Bonds) Upgraded the rating from INE565A08043 India “AA” to “AA+” (Basel III Tier II Ratings & and also the 05.10. 2026 Veri fied 05.10. 2026 Bonds) Research outlook from Limi ted “Positive” to “Stable” Long-Term Issuer Rating This is for your information and appropriate dissemination. Yours faithfully, Raghuram Mallela Deputy General Manager/ Company Secretary & Compliance Officer Investor Relations Cell, Central Office, 763, Anna Salai, Chennai 600 002 044 – 7172 9791, 2888 9360 | investor@iob.bank.in India Ratings Upgrades Indian Overseas Bank and its Basel III Tier 2 Bonds to ‘IND AA+’/Stable Oct 05, 2026 | Indian Overseas Bank | Public Sector Bank India Ratings and Research (Ind-Ra) has upgraded Indian Overseas Bank (IOB) Issuer Rating to ‘IND AA+’ from ‘IND AA’, with a Stable Outlook. The detailed instrument-wise rating actions are as follows: Details of Instruments Size of Rating Regulator of Date of Coupon Maturity Rating Instrument Type Issue (INR Assigned with Instrument Issuance Rate Date Action billion) Outlook/Watch Basel III Tier 2 Refer ISIN IND - - - 11.65 Upgraded bonds* annexure AA+/Stable Issuer rating # - - - - Upgraded AA+/Stable *Details in Annexure # There is no instrument being rated and hence, Regulator of the Instrument is not applicable. The rating scale and definitions are being followed as stipulated in SEBI Master Circular for CRAs. Analytical Approach Ind-Ra continues to factor in the support available to IOB from the government of India (GoI) to arrive at the rating. The GoI’s 92.44% stake in IOB at end-June 2026 indicates the bank’s systemic importance to the government. The Basel III tier-2 bond rating is based on Ind-Ra’s expectation of continued support from the GoI to meet the minimum capital requirements. Detailed Rationale of the Rating Action The upgrade reflects IOB’s sustained strengthening of its credit profile over the past year, supported by improved asset quality, stronger core profitability and comfortable capital buffers. Furthermore, controlled slippages, lower credit costs and adequate provision coverage have enhanced the bank’s ability to absorb expected and unexpected credit losses, while the increasing share of granular RAM advances has supported business growth. Profitability has improved on the back of healthy loan growth, stable margins and lower credit costs, with the return on assets (ROA) sustaining above 1.2% in the past few quarters. Capitalisation remains comfortable, and supported by internal accruals, should remain adequate for growth and the transition to the ECL framework even without the proposed capital raise. The rating also factors in IOB’s granular retail deposit franchise and healthy deposit mobilisation. These strengths are partly offset by the moderation in the CASA ratio, advances growth continuing to outpace deposit growth, the consequent increase in the loan-to-deposit ratio, rising concentration in gold-backed advances, and geographical concentration, with a significant share of the branch network and business continuing to be concentrated in southern India. Sustaining deposit growth, profitability and asset quality amid rapid portfolio expansion will remain key monitorables. List of Key Rating Drivers Strengths Adequate capitalisation Steady liability franchise Improving asset quality Sustained improvement in profitability Weaknesses Geographical concentration Detailed Description of Key Rating Drivers Adequate Capitalisation: IOB’s capital buffers remained adequate at 1QFYE27, with its CET1 and Tier 1 capital ratios steady at 16.88% (FYE26: 16.94%; FYE25: 17.13%), and an overall capital adequacy ratio of 19.36% (19.78%; 19.74%).The capital ratios remain comfortably above the regulatory minimum and continue to be adequate to support advance growth in line with management guidance of around 15% yoy for FY27. The bank’s total credit risk weighted assets (RWA)-to- net advances ratio remained moderate at 58.2% (FYE26: 56.5%; FYE25: 60.5%), reflecting its relatively capital-efficient loan mix. Ind-Ra expects IOB’s improved earnings and contained asset quality to support internal capital generation. The bank reported an ROA of 1.41% in 1QFY27 (FY26: 1.2; FY25:0.9%); the management expects to maintain ROA at around 1.3%. Furthermore, the net NPAs declined to 0.18% at 1QFYE27 (FY26: 0.21%; FY25: 0.37%) and the provision coverage ratio (excluding technical write-off) improved to 86.3% (85.5%; 82.9%), limiting incremental provisioning requirements on legacy stressed assets. For the expected credit loss framework, the bank had created provisions of around INR21.5 billion against its estimated requirement of INR30 billion by 1QFY27 and intends to provide for the balance during FY27. The management also plans to raise equity of up to INR50 billion, potentially in multiple tranches, during 3QFY27 and 4QFY27, along with INR10 billion through Tier 2 bonds, which, if completed, would further strengthen the bank’s capital buffers and provide additional headroom for growth and ECL-related provisioning. However, even if the proposed capital raise does not materialise, Ind-Ra expects IOB’s existing capital buffers, supported by healthy internal accruals, to remain adequate for its near-to-medium-term growth and ECL provisioning requirements Steady Liability Franchise: The bank’s CASA ratio remained stable at 41.05% in 1QFY27 (FY26: 40.99%; FY25: 43.65%; FY24: 43.9%), supported by an 18.14% yoy increase in savings deposits. The deposit profile remains largely granular, with retail deposits constituting around 94% of the total deposits. Total deposits grew 13.72% yoy in 1QFY27, lower than net advances growth of 22.75%, resulting in an increase in the loan-to-deposit ratio to 85.63% (FY26: 84.31%). The bank has intensified deposit mobilisation, and has also mobilised around USD300 million through FCNR(B) deposits, leveraging its overseas presence and existing NRI customer base. The bank’s ability to sustain deposit growth in line with credit expansion amid continued competition for deposits will remain a key monitorable over the near-to-medium term. Improving Asset Quality: The bank’s gross NPA ratio declined to 1.33% in 1QFY27 (FY26: 1.42%; FY25: 2.14%), supported by contained slippages and recoveries. The provision coverage ratio, excluding technical write-offs, improved to 86.3% in 1QFY27 (FY26: 85.5%; FY25: 82.9%), while the net NPA ratio declined to 0.18% (0.21%; 0.37%). Furthermore, the bank’s annualised gross slippage ratio remained low at 0.26% in 1QFY27 (FY26: 0.42%; FY25: 1.72%). Around 80% of the agriculture portfolio comprises gold-backed loans, with an average LTV of around 60%. Within retail, secured loans accounted for 29% of the total advances, while unsecured retail loans constituted only 2%; stress was largely concentrated in granular, lower-ticket exposures, while larger-ticket exposures continued to perform well. The corporate portfolio also exhibited benign slippages and a low GNPA ratio of 0.25% in 1QFY27. In the NBFC segment, exposure to other NBFCs accounted for 5.5% of the total advances as on [Showing first 8,000 characters — download PDF for full document]