Indian Overseas Bank Reports 56% Surge in Q2 Net Profit at ₹1,912 Crore

Public sector lender Indian Overseas Bank (IOB) has reported a 56 per cent year-on-year growth in net profit at ₹1,912 crore for the quarter ended September 2026 (Q2FY27). The profit growth was supported by strong net interest income (NII) and partially aided by a lower tax outgo compared to the corresponding period in the previous year.

Net interest income for the quarter increased by 26 per cent year-on-year to ₹3,867 crore, while operating profit also rose 26 per cent to ₹3,016 crore. The bank's domestic net interest margin increased by 14 basis points year-on-year to 3.49 per cent.

Ajay Kumar Srivastava, Managing Director and CEO of Indian Overseas Bank, stated in a post-earnings media interaction that the bank maintains an internal mandate for annual net profit to grow by a minimum of 25 to 30 per cent. He attributed the performance to consistent credit expansion and funding cost management.

Total business expanded during Q2FY27, with advances growing 24.35 per cent to ₹3,45,650 crore. Deposits grew 20 per cent year-on-year to reach ₹4,07,428 crore. The expansion in advances was led by the RAM (Retail, Agriculture, and MSME) portfolio. Retail credit rose 33.77 per cent, agriculture credit grew 47.31 per cent—largely driven by agri jewel loans—and MSME credit increased by 13.8 per cent. Srivastava noted that the lender does not anticipate stress in the jewel loan category.

Asset quality showed continued improvement. The Gross NPA ratio declined by 64 basis points year-on-year to 1.19 per cent, and the Net NPA ratio dropped by 12 basis points to 0.16 per cent, supported by steady recoveries.

Regarding deposit mobilization, the bank secured approximately ₹11,000 crore (or $1.2 billion) in FCNR(B) deposits under a special window, noting that the funds have been deployed. Even without this mobilization, general deposits grew by 17 per cent. IOB is also targeting $500 million in fundraising through the Reserve Bank of India’s ECB window by December, with around $250 million already finalized and discussions ongoing for the remaining amount.

On regulatory provisions, IOB has made approximately ₹2,700 crore in provisions for the expected credit loss (ECL) framework, which the management expects to cover anticipated requirements while buffers continue to be built over the next two quarters. The bank also reported a sequential dip in other income due to non-recurring priority sector lending certificates (PSLCs) revenue earned in Q1.

On the technology front, IOB stated that it has benchmarked its cybersecurity systems against industry practices and engaged PwC to identify gaps, describing its security approach as a continuous monitoring process.

Shares of Indian Overseas Bank ended the trading day up nearly 6 per cent at ₹30.38 on the National Stock Exchange (NSE).

"The financial performance reported by Indian Overseas Bank highlights the positive impact of robust credit expansion, particularly within the retail, agriculture, and MSME segments. Maintaining consistent profitability alongside a significant reduction in gross and net NPAs demonstrates effective asset quality management and healthy recovery processes. For businesses, particularly MSMEs relying on institutional credit, a strengthening banking sector with improving asset health signals a stable environment for capital access and sustained financial planning." — Dr. Shishir Gupta, Founder & CEO, StartupLanes