R ARIVANANTHAM
CHENNAI, JULY 25
When a bank’s profit rises nearly 50% while its gross bad loans fall to a historic low, the headline is not merely about a strong quarter — it is about the possible arrival of a new phase of growth. For Indian Overseas Bank, the first quarter of FY27 has delivered precisely that combination: accelerating earnings, cleaner asset quality, expanding margins and an increasingly global ambition.
- Indian Overseas Bank posts 49.3% YoY surge in Q1 FY27 net profit; NII jumps 34% to ₹3,688 crore
- Asset quality sharpens dramatically as GNPA falls to 1.33% and NNPA to 0.18%; recovery momentum remains strong
- MD & CEO Ajay Kumar Srivastava says GIFT City IBU to be operational within two months
- IOB mobilises nearly $300 million in FCNR(B) deposits in just three weeks; targets $1 billion overseas resource mobilisation
- Bank eyes 13–14% credit growth, 3.3–3.4% NIM and stronger international banking footprint in FY27
- With 4.52 lakh NRIs and four overseas branches, Chennai-headquartered lender seeks to turn global connectivity into its next growth engine
The Chennai-headquartered public sector lender reported a 49.3% year-on-year rise in net profit to ₹1,659 crore for Q1 FY27, compared with ₹1,111 crore in the corresponding quarter last year. Profit was also higher than the ₹1,505 crore recorded in Q4 FY26. Total income rose to ₹10,938 crore from ₹8,866.47 crore a year earlier.
The bigger story, however, lies beneath the profit number: IOB is simultaneously strengthening its balance sheet, expanding its international resource mobilisation and preparing to establish a new banking presence at GIFT City in Gandhinagar.
NII surges 34%; margins widen as funding costs ease
IOB’s net interest income climbed 34.3% year-on-year to ₹3,688 crore, while net interest margin improved to 3.48% from 3.17% in Q1 FY26.
Interest income rose 14% to ₹8,778 crore, while interest expenditure increased 5% to ₹5,090 crore, reflecting the benefit of moderation in the cost of deposits.
Non-interest income also surged 67% to ₹2,160 crore, aided by commission income, recoveries from technically written-off accounts, sale of priority sector lending certificates and other income streams.
The quarter thus provided a powerful earnings mix: stronger core banking income, improved margins and robust non-interest income.
Bad loans fall, recovery engine keeps running
The lender’s asset-quality transformation remained one of the strongest features of the quarter.
Gross NPA declined to 1.33% in June 2026 from 1.97% a year earlier, while net NPA fell to 0.18% from 0.32%.
IOB recovered ₹654 crore during the quarter, more than three times the quarterly slippages. The bank’s recovery trajectory, however, is gradually changing as the pool of old stressed assets shrinks.
Ajay Kumar Srivastava, Managing Director & CEO, IOB, said the technical write-off pool had reduced substantially over the years.
“Five years back the pool used to be around ₹47,000 crore. Now, the technical Written-off pool has come down to around ₹20,000 crore and NPA pool is around ₹4,000 crore only,” he said.
The improvement is significant because it indicates that IOB’s earnings are increasingly being supported by fresh business growth and core income, rather than merely by a large legacy recovery opportunity.
GIFT City IBU to open in two months
The next major strategic milestone is taking shape in Gujarat.
IOB is moving rapidly to establish an International Banking Unit at GIFT City in Gandhinagar, India’s international financial services hub.
“The arrangements to establish an IBU at GIFT City in Gandhinagar are on fast pace. The branch would be opened in another two months,” Srivastava said.
The proposed GIFT City presence is expected to strengthen IOB’s international banking capabilities and support its expanding foreign-currency business.
The bank has already received the necessary regulatory approval to establish an IFSC Banking Unit at GIFT City, enabling it to undertake offshore banking and foreign-currency business from the IFSC.
The bank has set an internal target of around $500 million of business through the GIFT City branch by the end of FY27, according to management commentary.
$300 million FCNR(B) in three weeks; $1 billion global mobilisation target
IOB’s international expansion comes at a time when the bank is aggressively tapping its overseas and NRI franchise.
The lender has mobilised nearly $300 million in FCNR(B) deposits within three weeks of launching a special product under the RBI’s temporary foreign-currency deposit mobilisation scheme.
IOB expects FCNR(B) mobilisation to cross $500 million and potentially reach $600–650 million by September, while its broader overseas resource-mobilisation ambition is close to $1 billion, comprising FCNR(B) deposits and overseas foreign-currency borrowings.
“We have already mobilised around $300 million under the FCNR(B) scheme. Our target is to raise nearly $1 billion by September, of which $600–650 million will come through FCNR(B) deposits and the balance through overseas borrowings,” Srivastava said.
The bank is leveraging its 4.52 lakh NRI customer base and four overseas branches to drive this mobilisation.
The deposits have been sourced from a diversified geographical base including Singapore, Hong Kong, Bangkok, Sri Lanka and other Southeast Asian markets, reducing dependence on any single geography.
From customer acquisition to deeper relationships
IOB’s growth strategy is not limited to simply adding customers.
The bank has onboarded 1.17 crore customers over the past 12–13 quarters and is seeking to deepen relationships by expanding the range of products used by each customer.
“Every new customer brings opportunities across deposits, advances and cross-selling. That remains our key strategy,” Srivastava said.
He added that each new customer is hand-held for 100 days to deepen the relationship and encourage the use of multiple banking products.
The strategy comes against a backdrop of increasing digitisation. Management commentary indicated that digital transactions account for around 96% of total transactions, with the bank also focusing on faster digital onboarding and technology-enabled service delivery.
13–14% credit growth target; capital raising on the horizon
For FY27, IOB is targeting 13–14% credit growth, with scope for higher growth depending on business conditions.
Management has indicated a full-year NIM target of 3.3–3.4% and an ROA target of around 1.45–1.46% by the end of the financial year.
The bank is also preparing for capital augmentation, with a proposed ₹5,000-crore QIP equity raise and plans for Tier-II bond mobilisation, according to earnings-call commentary.
The objective is to ensure that the bank’s improving profitability is matched by adequate capital to support its next phase of credit expansion.
The IOB reset: Cleaner, bigger and more global
IOB’s Q1 FY27 performance offers a striking contrast to the image historically associated with stressed public-sector banking.
The bank has now crossed ₹5,000 crore in annual net profit in FY26, while continuing to improve asset quality, expand advances and deposits and strengthen its capital position.
The Q1 FY27 numbers suggest that the transformation is continuing.
The ₹1,659-crore quarterly profit is significant.
But the more consequential markers may be elsewhere:
- ₹3,688 crore NII, up 34%;
- 3.48% NIM, up from 3.17%;
- 1.33% GNPA;
- 0.18% NNPA;
- ₹654 crore quarterly recovery;
- nearly $300 million FCNR(B) mobilisation in three weeks;
- GIFT City IBU expected within two months; and
- a target of nearly $1 billion in overseas resource mobilisation.
Together, these numbers paint a picture of a bank attempting to move from repair to reinvention.
For Chennai’s Indian Overseas Bank, the next chapter could therefore be written not only in its traditional domestic markets but also across GIFT City, global NRI corridors and the expanding international financial architecture of India.
