Indian Overseas Bank Reports First Double-Digit Deposit Growth in Two Years

Indian Overseas Bank has reported its first double-digit deposit growth in two years, signaling a potential turnaround for the Chennai-based public sector lender. MD & CEO Ajay Kumar Srivastava announced that savings deposits grew 11.36% year-on-year, while retail term deposits under ₹3.00 crore surged nearly 16%, marking a significant improvement after industry-wide deposit growth challenges.

Q3FY26 Financial Performance

The bank's third-quarter results for FY26 demonstrated strong operational metrics across key parameters:

Metric	Q3FY26 Performance
Net Interest Income	₹3,298.00 crore
Profit After Tax	₹1,365.00 crore
Net Interest Margins	3.32%
Domestic NIM Growth (June-December)	25 basis points increase
Global NIM Growth (Sequential)	11 basis points increase

Srivastava emphasized that Indian Overseas Bank stands as the only lender where net interest margins increased in both Q2 and Q3 despite four rate cuts by the Reserve Bank of India during this period.

Strategic Focus on RAM Segment

The bank maintains its strategic emphasis on the retail, agriculture, and MSME (RAM) segment, which now represents 76-77% of its total loan portfolio. This conscious strategy, implemented over the past four to five quarters, has delivered consistent double-digit growth both quarter-on-quarter and year-on-year.

Segment	Portfolio Composition	Growth Strategy
RAM Portfolio	76-77% of total loans	Primary focus area
Retail Component	24-26% of total portfolio	Housing, vehicle, LAP loans
Corporate Lending	Maintained at current levels	Selective approach

Retail growth is primarily driven by housing loans, vehicle financing, loans against property (LAP), and general lending products. The bank's extensive branch network enables RAM lending across nearly 99% of its branches nationwide.

Deposit Growth Turnaround

After two years of industry-wide deposit growth struggles, Indian Overseas Bank's deposit performance shows marked improvement:

Deposit Category	Growth Rate	Significance
Savings Deposits	11.36% YoY	First double-digit growth in 2 years
Retail Term Deposits (<₹3 crore)	~16%	Strong retail deposit traction

Srivastava noted that this deposit growth momentum, combined with the bank's balanced loan portfolio mix and careful deposit repricing management, has enabled the institution to protect and improve margins despite the challenging rate environment.

Credit Portfolio Composition and Strategy

The bank's credit portfolio demonstrates a balanced approach to interest rate risk management:

MCLR-linked loans: 51% of portfolio
Repo-linked loans: 42-43% of portfolio
Domestic CD ratio: 81.81%
Global CD ratio: 84-85%

Corporate lending remains selective due to pricing concerns, with Srivastava explaining that significant deviations between the bank's intended lending rates and corporate expectations have led to a cautious approach in this segment. The bank prioritizes value addition to its balance sheet over aggressive corporate lending.

Margin Protection Strategy

Despite multiple RBI rate cuts, Indian Overseas Bank has successfully maintained and improved its net interest margins through strategic portfolio management. The domestic NIM increased by 25 basis points from 3.17% to 3.42% between June and December, while global NIM rose by 11 basis points to 3.32%. This performance reflects the bank's effective management of both asset repricing and deposit cost optimization in a challenging interest rate environment.

1 Day	5 Days	1 Month	6 Months	1 Year	5 Years
-2.12%	-1.84%	+1.91%	-12.94%	-34.04%	+213.48%

Indian Overseas Bank has outlined its recovery projections for the fourth quarter, setting targets that reflect the bank's commitment to improving asset quality and reducing non-performing assets. The public sector lender has provided specific guidance on expected bad loan recoveries and NPA reduction metrics for the upcoming quarter.

Recovery Targets and Projections

The bank has projected bad loan recoveries in a specific range for the fourth quarter, with clear annual targets established. The following table outlines the key recovery metrics:

Parameter:	Target Amount
Q4 Bad Loan Recovery:	₹1,400.00 - ₹1,500.00 crores
Annual Recovery Target:	Over ₹4,000.00 crores
Expected Gross NPA Reduction (Q4):	5-7 basis points

These projections indicate the bank's systematic approach toward asset recovery and its confidence in achieving substantial improvements in asset quality metrics during the quarter.

Asset Quality Improvement Strategy

The anticipated gross NPA reduction of 5 to 7 basis points in Q4 represents a significant improvement in the bank's asset quality parameters. This reduction, combined with the targeted recovery amounts, suggests that Indian Overseas Bank has implemented effective mechanisms for addressing its non-performing assets portfolio.

The bank's annual target of over ₹4,000.00 crores in recoveries demonstrates its comprehensive approach to asset resolution. This target encompasses various recovery channels and resolution mechanisms that the bank has put in place to address its stressed assets portfolio.

Financial Impact and Outlook

The projected recovery figures represent substantial amounts that could positively impact the bank's financial performance and profitability metrics. The combination of increased recoveries and reduced gross NPAs is expected to strengthen the bank's balance sheet position and improve its overall financial health.

These targets reflect Indian Overseas Bank's focused strategy on asset quality improvement and its commitment to achieving better financial performance through enhanced recovery processes and effective NPA management.