Indian Overseas Bank Q2 net surges 56% on strong interest income growth

Public sector lender Indian Overseas Bank reported a 56 per cent year-on-year increase in net profit at ₹1,912 crore for the quarter ended September 2026 (Q2 FY27), supported by higher net interest income and lower tax outgo.

Net interest income increased 26 per cent year-on-year to ₹3,867 crore, and operating profit rose 26 per cent year-on-year to ₹3,016 crore. The bank’s domestic net interest margin increased 14 basis points year-on-year to 3.49 per cent.

Net Profit

“Our internal aspiration and mandate is that net profit grows at least 25–30 per cent year-on-year each year. In the last 10 quarters, this consistency has been maintained,” Ajay Kumar Srivastava, managing director and chief executive officer of Indian Overseas Bank, said in a post-earnings interaction, calling the performance sustainable. He attributed growth largely to credit expansion and funding-cost management.

Total business of the bank increased robustly in Q2 FY27, with advances rising 24.35 per cent to ₹3,45,650 crore. Deposits rose 20 per cent year-on-year to ₹4,07,428 crore.

Advances were driven by growth in the retail, agriculture and MSME portfolio. Retail credit rose 33.77 per cent, agriculture credit 47.31 per cent, largely on agri-jewel loans, and MSME credit 13.8 per cent.

Credit Growth

Srivastava attributed expansion partly to faster processing and decentralised sourcing through branches and loan processing centres. He did not anticipate stress in the jewel loan category.

Asset quality continued to improve, with gross NPA ratio reduced by 64 basis points year-on-year to 1.19 per cent and net NPA ratio reduced by 12 basis points year-on-year to 0.16 per cent, primarily attributable to steady recoveries.

On deposits, the bank mobilised around ₹11,000 crore, or $1.2 billion, in FCNR(B) deposits under the special window, and said the entire amount had been “suitably” deployed. Even without the FCNR(B) mobilisation, deposits grew 17 per cent, the MD said.

ECB Funding

IOB is targeting $500 million in fundraising through the RBI’s external commercial borrowing window by December. The MD said around $250 million had been finalised, with the remaining amount under discussion with banks and agencies.

“Overall, $500 million by December is what we are targeting. Around $250 million has already been finalised, and for the balance $250 million, we are in discussions with banks and agencies,” he said.

On the expected credit loss framework, IOB had already made around ₹2,700 crore in provisions, which the MD expects to cover the bank’s anticipated requirement. The bank will continue building buffers over the next two quarters, he added.

Other Income

With regard to a 43 per cent sequential dip in other income, the bank said it had earned around ₹900 crore from priority sector lending certificates in Q1, which did not recur in Q2.

With regard to cybersecurity controls, the MD said IOB had benchmarked its systems against industry practices and also engaged PwC to identify gaps and recommend improvements. He described the lender’s cybersecurity approach as a continuous process requiring round-the-clock monitoring.

The shares of IOB ended the trading day at ₹30.38, up almost 6 per cent on the NSE.

Published on October 26, 2026