Indian Overseas Bank analyst Q&A

Thank you so much sirs for walking us through the comprehensive presentation. We now open the floor for questions. I request participants to please raise your hand when you would like to ask a question. Kindly introduce yourself, your name and the organization that you rep resent before proceeding. Our team members would bring the hand mic to you i would request you to please speak in the mic

Compliments to you sir the entire team of Indian overseas bank for the fantastic result, not only for this quarter but for the whole year i mean mind-blowing numbers, if you look at the entire, I mean deposit, advances, business, everything, total business has gone up by 20.76% and the credit is 24.16%. Deposit which has been a challenge for many of the other banks has grown by 18.03% against very modest targets given by you of 12 -13% or 14-15%. So, you really deserve rich compliments for the same, sir. Having said that, I got a couple of, I mean, some questions, some observations from my side. The one thing which I observed is that in the presentation, and here also on the presentation given here, the SMA numbers have not been disclosed. So that will give a better picture about any kind of stress coming forward now with this West Asian crisis also and the geopolitical other uncertainties. Is there any pressure in the month of March or are you feeling something in April now also? Any pressure of that kind, especially from the MSME clients or some small clients, or some export clients on that front. So, this is my just first question if you can answer that. My other observations are that now with this ECL now guidelines finally coming out from RBI and you have written there that you have got a buffer of 1750 crores in ECL. In this quarter only you have given 250 crore more through that and you also got old COVID-19 amount also of about 900 crores. So, with that, are you comfortable taking care of your ECL requirement, expected credit loss requirements? So, if you take it up these two, can I then, or shall I talk about all other points now only?

Let me respond to these two, then we can take another one. So, regarding SMA, if you look at year and year, March ‘25, March 26, so March ‘25 our SMA percentage to total credit used to be 6.70 last year. And as in March ‘26, it came down to 4.92%. So, SMA front is no challenge and that can be ascertained by the slippage ratios also. Slippage ratio also has been at the minimum only. So, SMA, we do not see any challenge per se. And regarding West Asia crisis also, we have so far not seen any stress in any of our existing accounts so far. Individual cases may be there, but right now the SMA or NPA have got no impact of West Asia crisis so far. That was the part number one. Part number two is regarding ECL provisions. In the December quarter Q3 of this year, we created 1500 crores provision exclusively in the name of ECL. And Q4 we added 250 crores additional. So right now , we are at 1750 crores additional provision in the balance sheet exclusively for taking care of ECL requirements. And as per our calculation, we anticipate that the total impact of ECL, the new guideline which has been given by the regulator, it is going to be around 3000 crores. Out of that 1750 crores we have already made, still fourth quarters are there. By the time 1st April ‘27 comes, I think we will be having a cushion in the name of ECL itself, more than 3000 crores. And the idea is to front load the entire ECL requirement. We internally do not want to take that five-year route for taking care of that additional requirement. So that is the plan and we are very successfully so far, we have been able to handle it.

Sir, point well taken, sir. And it's very good to know that you are going to take care of the entire amount and not going to spread over either one, two year or five years, which is allowed, which is good to know, strengthen the balance sheet. Having said that, some data points are the employee cost in this quarter has gone down by almost about 340 crores and other operating expenses have gone up by about 200 crores. So, employee cost has gone down because of the bond yield adjustments or is there any other reason and how much per quarter run- up we can take up for the coming year 2026-2027.

Our provision requirement whatever was required, we made more than that the provision. Till December quarter itself, it was taken care of and the actual PLI requirement also turned out to be very low as compared to the provision which we had created. So Q4, that sort of provision requirement was not there. So that is our staff expenses you can see. it has come down by almost 200 or 250 crores.

Okay, sir. Now, on this treasury side, because of this quarter also, there is a tremendous impact of the treasury not yielding much results, rather it's negative. And had it been added, the profitability would have been much higher. So, going forward in 26-27, or initially first two quarters, what do you feel the treasury will start giving because of the the bond yield also i mean now becoming favorable, what is your perception you say about the treasury operations

We do not see, I will say, huge gain from treasury for next two quarters because of uncertainty prevailing and because of geopolitical issues . We do not know how it will pan out and going forward the only thing we can say that is, we are very nimble- footed and whatever happens in the market, the team is very well equipped to adjust the plan and execute it accordingly. So, let us see how it pans out.

Okay, the last one in this round. Now the government has announced again COVID-like line ECGL, I mean ECLG 5.0. So with that, don't you feel that you are already growing very fast on the credit side and now with this, some more opportunity to grow the credit will be there. So, number one, how do you see that the people will come forward looking at your portfolio for taking advantage of this scheme which is announced? I think, I don't know the full scheme, whether it has come out or not and secondly, what kind of target you will give for the credit growth coming forward or credit deposit in the overall business growth?

So, this ECLGS, of course, two days before it was approved by the cabinet. And as per our initial assessment, almost 25 % to 30% of the portfolio, MSME and non-MSME, that will be eligible for this ECLGS 5.0 support. How many of them come for that actual 20% requirement that we are yet to see but our broad assessment is that around 8,000 to 10,000 crores of additional funding can happen through this ECLS mode this is valid up to March 27 still almost in 11 months are there and I think it will help in overall credit growth not only for IOB but for the entire industry

Okay sir thank you and all the best and I'll come back again if other colleagues also have their questions. Thank you.

Good afternoon, sir. Thank you very much to you and your entire team for organizing this and for the detailed presentation. So , my question was around positioning, because the state that you are focused on is very attractive commercially. But at the same time, competition is well entrenched. So in terms of your positioning, how are you working on that further? The growth has already been very impressive. But with a medium-term view, 3-5 year view, across your main target segments, what work are you doing there to ensure that there is continued market share gains or growth given, you know, all other players, including NBFCs, other banks, everybody is also trying to, your market is very attractive. So how do you look at that?

We are having one internal study of next three years, what is going to the plan and where we want to be over next three years period. And we do see that around 14 to 15% of growth, overall growth, 1 and 2% here and there. We feel that we are very well placed to grow. And if you have seen our capital requirement also, CRA has reached 19.78%, much, much higher than the regulatory prescription. And with that sort of capital and the internal accruals, which by virtue of continuous and consistent net profit numbers. We do hope that by virtue of the internal strength, growth will happen. And at the same time, the overall economic situation of the country, that is also very, very growth-oriented. We all know that the country is growing, GDP is growing. and keeping those things in mind and assuming that there are no uncertainties like West Asia crisis or any additional thing. We do hope that 14 % to 15% to 16% growth for overall industry, not only for IOB, is very much feasible and we can do better than that. Analyst - Namit Arora, In dGrowth Capital: Thank you, sir. So , my second question was on risk management, especially credit underwriting and the processes, and also on operational risk, because unfortunately, even with some larger private sector players, there have been some unfortunate incidents. So, in general, your philosophy on risk management and how are you working on continuously to strengthen the risk management systems as well as the capabilities of the team? Thank you.

Our policy and philosophy both I will say very simple. Lending is a risky business. So, risk will always be there. How it can be mitigated? We work on those aspects. And if you look at over last three years numbers, whether it is slippage or NNPA or GNPA or credit growth or even number of frauds, operational risk we talked about. You will see that that is hardly anything as compared to the industry and all those critical numbers and parameters, they are consistently coming down. Slippages, the type of underwriting we are doing, the type of monitoring control we are having over the assets, you can see for last more than 11-12 quarters. Slippage ratio is 0.11 or 0.12, one of the best in the system. So, I do hope that the risk part is well taken care of. Of course , it is never comfortable to say that we have conquered everything. That risk is always there because as I said lending is a risky business. But all protocols, all safety measures are there in place and from central office level. That risk part is very well and regularly articulated to the field so that everyone is aware of the risks involved with lending part.

Thank you very much for your detailed thoughts, sir. And all the best to the entirety. Thank you. Sorry, I had not introduced myself. I'm Namit Arora from InGrowth Capital. Thank you.

Hello. Thank you. Sir, Ramesh Pojwani from Mehta and Vakil. I was seeing your results from March ‘22 to March ‘26. There has been a quantum improvement year-on-year, in all parameters, all the ratios, I think the March ‘26 results stand out as the best performance till date. Few observations were there one was, you have maintained consistently the PCR at 97.5 and in March ‘26 you have kept the provisional amount lower, that means you are confident that your recovery from written-off accounts as well as from the NPAs will still further accelerate, enhance over and above what has been done going forward.

Okay. Exactly yes sir, if you look at the numbers actual numbers our net NPA is around 600 odd crores and we certainly do not want to be in that situation where net NPA becomes zero that will be a challenge to maintain at zero level going forward so certainly we do not want to go to that level. And if you look at the numbers quarter on quarter, over the last many quarters, you can see , the addition to NPA is around 200 to 250 crores. Against that recovery is around 800 to 900 crores. In the full year, slippage is 1200 crores for 2025 -2026 if you see. Against that recovery is around 3700 crores. So , this recovery more than slippage is happening for last three years consistently. And going forward also, we are pretty sure that it will happen. Only thing which we have moderated is that till last year we were targeting and we were doing I will say recovery of more than 4000 crores every year. Now because stock has come down, the outstanding NPA numbers have come down. So, this year we are targeting around 3600 crores of recovery. So that is the only change. Rest other things continue as it is.

It's very wonderful to hear. The other part was there is a Six-page section on ESG highlights in your presentation, in your highlights. In that, there has been a reference and an emphasis towards solar energy as a RE, renewable energy source, where the bank will play a leading role in funding the projects. Because yesterday we were in a company's meeting which said that the government of India has set a target of 550 gigawatts from solar power. So, it's a huge, hu ge, humongous opportunity for the enterprise and straight away to the banks. How do you see this panning out? Because one, many a company has started installing solar rooftops on their commercial premises, retail premises and in a company like Tata Power has taken the initiative of doing it on residential premises more in Delhi than in Bombay. So , this appears to be a very , very big line of business activity, entrepreneurial activity and obviously banks have to play a part in this to make it a success for the basic reason the government wants it. The Prime Minister has initiated three schemes whereby almost more than 1 lakh 60 thousand crore has been given as incentive under PLI and ALMM and other schemes. So how is your bank positioning itself considering the evolving framework or the evolving scenario going forward?

We are very, I will say, not very aggressive, but of course we are aggressive as far as solar lending is concerned. In almost all the committees at central office, whether it is ED level or GM level or MD level committee, one or two proposals of solar lending, it does come. At corporate level also, at mid-level also. And over and above, Government of India, as you said, that lot of emphasis is there. Pradhan Mantri, Surya Ghar Beezle Yojana is there in which all individuals are eligible and government is giving subsidy also. Even we as banks, wherever we are having our own premises, we are looking for the opportunity to install solar panels on the rooftop. So that level of awareness and aggressiveness is there. We are very open, we are having at least three different schemes at very attractive rates and at very attractive terms and conditions which encourage people and companies to come forward, come to us f or lending support. And I will say that it is one of the top five important parameters for us going forward in which lending is going to happen in this year.

That's wonderful, very nice to hear of that. Sir, the last thing is, there is IMD has forecast a 94% of the average rainfall going forward, which will at least put pressure on our agri -advances which are being shown as 1 lakh crore. One, the government, the agriculture ministry, fertilizers, as well as otherwise, will take care to mitigate the effect. But this area appears to be an area of concern. Maybe it can reflect in our NPAs or maybe any government co-guarantee in the MSME sector as they have done because of this West Asia crisis can help.

Exactly. When monsoon is not good, naturally it will be having an adverse impact on agriculture. That is a given thing. What I can say about IOB, the portfolio you are talking about, Of course, as I said that agriculture will get impacted and ofcourse we have to find our ways to how to manage. But as far as our portfolio is concerned, I will say that since we are south-west, a major part of the agriculture happens in Tamil Nadu and southern regions. And where it's not crop loan, the typical crop loan which happens in the rest part of the country. In that geography in which we generally operate, mostly operate, there is agriculture jewel loans, backed by jewel. It's not pure crop loan. And since jewel is available as security, we do not face over the years also, IOB in particular, we do not face any challenge in agriculture NPA. Rest part of the country, of course, it's independent crop loan, no security other than crops. So that challenge remains.

Thank you.

Hello, sir. My name is Rupsen Umrani. First, I want to give your team many congratulations on behalf of many financial crisis that your bank net operating profit that one 10,000 crore and net profit that 5,000 crore. That beautiful journey is that one. Then future, what you think about the financial market and how you give your customers relief, sir?

We are a commercial organization. We believe that growth is the lifeline. So we need to grow. And we need to grow in all spheres of banking where growth is required, other than, of course, bad debts and NPAs. And every year we target 13 to 15 percent of gr owth in all critical parameters. And last three years we have been successfully surpassing that. Last financial year also the plan was to grow at 13 to 15% both sides, asset liabilities. But we grew by 24% in credit and 18% in deposit. So , the same trend will continue. We do not want to do any special thing, the momentum which we have created. I would like to continue with that going forward also.

Hello sir. Sir, I am Devansh from Motilal Oswal. Sir, first of all congratulations for your good results. So, first question is, your taxation, provision for tax have been little volatile and like going forward can you give any guidance on effective tax rate?

For taxation there are two things. One thing is that in Q3 of last financial year, we shifted to new tax regime that is 25%. But since we are having accumulated losses still in the balance sheet, so that tax is not payable. That is one part of the story. So ,no tax as such. And of course, if you are talking about some tax demands which have been raised by the authorities, so against that I am having a number which I can share with you. Last three years t here has been a demand of 4832 crores pertaining to previous assessment years starting from 2013-14. These are the additional demands which we got recently over the last three years. And against those 4,833 crores of raised demand by the tax authorities, we got a refund of 6,318 crores during these three years. So whatever demands have been raised, more than that we have got as a refund also because of previous cases getting settled in favor of the bank.

Sir, one more thing. So, your CD ratio has gone from 80% to 84%, the global one. So , going forward, do you foresee any liquidity stress on it? And how comfortable are you? What is your cap on maintaining that?

Certainly, there is no challenge. See, CD ratio is one part. And there is no regulatory prescription as far as CD ratio is concerned it's a general perception that it should be around 80 % but if you want to have a regulatory prescription that what percentage is ideal there is no such guideline available. We have been focusing on LCR and every day we are monitoring and reporting to the authorities. As on yesterday the LCR is around 151% of the bank as on March ‘26 it was around 122-123%. So even if we are growing at 20% or 21% in credit side, we do not see any challenge on liquidity side.

Okay, sir one last question. So, from your advance book, you have around like 5 to 6% going to overseas, but your NPA contribution from your overseas account is around one third. Sir, any like, what is your outlook on the overseas account and going forward what will be numbers look like?

Yes, these NP accounts in overseas center, they are legacy accounts very old ones because recent slippages last three years. There have not been many as far as slippage is concerned, whether domestic or overseas. So, one thing is that they are legacy accounts and all those cases are in various stages in different courts overseas itself and there is that overseas centers other than court and there is no SARFAESI or no DRT, nothing like that. We have to go through court only. That process is on and whenever court decides, we get whatever we are required to get.

And one more thing, sir. So, on your advances from overseas, it's been year-on-year it's been mostly flat. So, is it because of the geopolitical issue or you are changing your focus to other revenue?

No, it's part of the strategy. I will give you one number, like, yield on advances for the bank. If you look at domestic yield on advances is 9.08% above 9. If you take overseas, then it comes 8.92 because the margin part at overseas centers is not much , so wherever we get good margin, good security, only there we go for lending because it affects my NIM also, yield on advances also, many parameters get impacted by that.

So any guidance on your NIM margin going forward?

Yes, 3.2, I think. Global it is 3.21, domestic it is 3.32. We expect to maintain at this range between 3.30 to 3.35.

Okay sir, thank you.

Dear friends, requesting you to please raise your hands for any questions.

Good morning, sir. Congratulations for the results. And so, my question was MSMEs NPAs ratio have seen some increase. So, like what are your, are there any specific MSME segments or regions where the bank is witnessing stress currently or are they the geopolitical, or is this the reason due to the geopolitical constraints going around?

No, MSME, our NP percentage is 2 only, around 2, I think 2.4 or something. So, it's certainly not high. And the West Asia crisis, I already replied that MSME, Last three years we have not seen any challenge in any portfolio as far as because of disturbance in West Asia. Individual cases may be there and I think with the implementation of ECLGS 5.0 which Government of India has given, I think even if any challenge is there, I think that will be taken care of very well by this ECLGS scheme. Going forward, I do not see any challenge.

Sir, the overseas NPA's book account remains elevated relative to domestic. So, is there any outlook?

As I said, it's all legacy accounts. Nothing has slipped over the last three years as far as overseas is concerned. Any substantial account, I will say. All are legacy accounts of 2015, 2016, 2017, and those cases are at different stages in various courts. So, we are waiting for the decision, but fresh slippages, fresh addition to NPA last three years from overseas centres is negligible.

Sir, my last question would be, will the bank continue towards the RMA section, that is retail, MSMEs and Agri, as we have seen their substantial growth towards that specific section only, or will there be some diversification or diversification in fees collections as well?

No, RAM will be our priority going forward also. Retail, Agri, MSME and why because I will say that we are having 3500 branches almost and they are spread across the geography in every nook and corner of the country . And this retail, agri and MSME can be done by all branches, all branch managers, everyone can do. And that is how, since all branch managers are taking lending decisions, a lot of enablers have been given to branch managers. Processing centers have been established where processing of the loans happens very quickly. So, the combined sum of all these things is resulting into substantial growth of RAM lending and the focus will remain there.

Thank you so much sir.

Just to add, RAM itself is diversified. So, RAM means we are having a granular portfolio and it is a diversified portfolio.

Got it, sir.

can I take it up from there which you answered. So now sir, we have come to almost I think 21-79, 79-21 ratio on the RAM and corporate if I am not wrong. So, we are going towards basically like any other NBFC or this thing that our reliance is getting more and more on the RAM, which you said the point is well taken that yes, you have got branch network and everything. But don't you feel that the time has come again when we should little bit relook at the corporate side also and see some good corporates with because the NIM, is also high. I mean, the interest paid is also higher. I'm not talking about the large corporate, but maybe A rated, BBB plus. Is there any kind of thinking so that even, I mean, the loan book is already growing very well, but still it can get still flipped. You know, from current this thing, you can go to 8.5 lakh to 9 lakh crore business Bank.

See, corporate lending is still happening. But the issue is that this corporate gets classified in MSME and agriculture also. Like state government, there are many agricultural marketing boards. Like , for example, SIDBI. So all they are corporates only, 4,000-5,000 crores we are giving. But it gets classified in retail and agriculture and MSME. That is one part of the story. Second part is that by doing RAM, if we are growing at 24% and having a good NIM of 3.33%, Why I should be going for those type of corporate loans where margin is not there? Our focus is on growing with substantial margin. So, we are not into that business where AAA rated any company is demanding at 6% or 6.25%. We very politely say no, because that is not our priority area. Wherever we are having opportunity to lend, of course we are lending, that is how we are growing. But at good margin, there is something for IOB also. So, we venture into that corporate only at that point of time. Otherwise, if it's not making sense, we do not do that. And that 24% growth with that margin, I will repeat, I think the strategy is working fine and wherever we get opportunity, we do lend. It's not as if that corporate lending is closed. Still, we are having 13,000 crores of pipeline, which is already sanctioned and in the process of disbursement.

Will you give some color on the gold loan Agri and non-Agri and the total gold loan and...And the relationship with the NBFCs and our exposure on NBFC and then co-lending space also?

Almost 70% of the jevel loan will be agriculture. The remaining will be classified as retail and MSME. And of our total credit portfolio, around 30% is jewel loan. And very solid and robust portfolio. No NPAs, no SMAs, good return, risk rate zero. Capital requirement is not there. And co-lending, I think one or two companies. Two companies only we are doing, not many. Our own branches are taking care of most of the things as far as jewel loan is concerned.

Hello. Okay, sir. What portion of your retail loans is now sourced fully digital?

It should be around 21 to 22 percent.

And how have been the delinquencies compared to branch source loans?

Not much. Because overall slippage ratio is hardly anything. Which makes me believe that whether it is happening through digital mode or at branch level also. I think quality is good and SM A are coming down, slippage is not happening. So , I have every reason to believe that through digital also quality is good.

And how much your fee income has not grown this quarter, YOY also? Going digital on it, I think YOY it's not grown.

Fee income, I think it is stagnant, I will say. It has grown by...

Yeah, overall on the year-on-year basis it has grown, I was seeing on the last quarter.

Let me see the numbers. If you can show it on the screen, slide number. Fee based income we have grown by 15.63%.

Yeah, overall on a yearly basis. I was seeing on the quarter basis.

On a quarterly year on year basis. Last year Q4 to this year Q4. That detail I may not be having. But overall if you see full 12 months, from 2418 to 2796 crores, 15.63% growth is there.

And what other operational parameters you think you know you have to still make the change in the bank and which is the most you think can increase your efficiency more in this bank?

96% of our transactions are happening through digitally. Year on year, and quarter on quarter we are improving on that. And the major focus is that since in the branches across the counter that footfall is not there and customers are not much there in the branches. What we are doing is that the people who are working in the branches, we are using them for sales and marketing. And that has brought lots of efficiency. The digital part takes care of the time and energy. And the employees who are in the branches, they are out in the market sourcing business, onboarding customers. And combined sum of these two has brought in lots of efficiency in the system.

So internally have you set any ROE or ROA targets for the next over a three year period? And is this ratio sustainable if you don't have the recoveries from those legacy accounts, you will be confident to sustain these ratios?

Absolutely. This question someone asked last year also. ROE if you see quarter on quarter that it's already given. We started from last year I think 0.92, we are at 1.23.

Yeah, you have done very well.

Before it was 1.32 in fact. So anything, our baseline is that ROA at any point of time should be above 1.20. That is the baseline. Above that, of course, we will try to do better. For the full year it is 1.23. So there is no internal guideline as such. ROAs and ROEs are the end result, the by-product of whatever we are doing.

But have you set any aspirational target?

No such target as it is, but the baseline is there that below this it should never come up.

But in spite of that, actually your valuations are still cheap actually, but because maybe there is no floating stocks. Is there any thought from the government what they want to do?

That is something which of course we are also grappling with. And maybe this year we will try to do something. In March, last financial year, two months before, we wanted to do one QIP. We did road shows also, but because of West Asia crisis, all those things, all of us had done it, flared up in last fortnight of March. So , we had to drop that idea. But this year again, we'll be back with that. So let us see. That creating a float in the system, that is a challenge, and we are working on it.

Is there a thought from the government already?

That 75% minimum, that is the requirement by SEBI. That's applicable to everyone, including us. Okay. Thank you.

Thank you, sir. Analyst – Manoj Kale,: Hello. Yeah, this is Manoj here. Actually, I wanted to know what AI is going to affect actually on the bank in future in regards to growth, jobs, all those things.

Yes, that AI part, our CTO gave that presentation. There are certain things which we are doing and maybe detail I will ask CTO to respond. But of course what I can say is that it's one of the key components and we are very aggressively looking at AI part. A brief part of some products we are doing if you can explain a little bit.

So, we have been...We have been moving into the AI part is not as a POC but as a full-fledged system. So we have been doing this for our automation of robotic process automation wherein all our routine tasks are being automated, and we are using this for our reconciliation as well and we are using this more for our fraud monitoring system and we have also the RBI mule hunter which is being there, which is an AI tool and because there are a lot of mule ac counts which are being, which is being identified and we are using the AI for that purpose and we are still moving into that directions wherein more and more initiatives will be taken by the AI. Thank you, sir.

In fact, our technology investment is increasing year on year, up to 15%. So, we are fully aligned with what is happening in the industry.

Thank you, everyone, for your valuable questions. As we have no further questions, we come to a close of the question and answer session. Now I would like to invite Shri Ajay Kumar Srivastava, our Managing Director and CEO sir, to share a few closing remarks.

Closing remarks

Thanks to all of you for sparing your time and coming here and listening to our growth story. Only thing I want to say that we want to be known as a consistent bank, consistent performance. Last three years we have been successfully doing that. Quarter on quarter, year on year, whatever is supposed to improve, it improves. Whatever is supposed to come down, it is going down. And going forward also, we intend to maintain that consistency with handsome growth of double digit, I will say. Thank you, everyone.