ICRA Ratings has reaffirmed IDBI Bank’s long-term ratings at ‘[ICRA]AA (Stable)’ and short-term ratings at ‘[ICRA]A1+’, according to a report dated September 18, 2025. The ratings reflect IDBI’s healthy profitability and capitalisation levels, benefiting from recoveries and lower credit costs. The bank’s vulnerable loan book and restructured book are at manageable levels, with contingent provisions providing further comfort. The rating is based on the bank’s standalone credit profile.
ICRA Ratings Reaffirmation
IDBI Bank’s long-term ratings have been reaffirmed at ‘[ICRA]AA (Stable)’ and its short-term ratings at ‘[ICRA]A1+’ by ICRA Ratings, as per the report dated September 18, 2025. These ratings take into account the bank’s robust profitability and capitalisation.
Key Rating Drivers
The ratings are influenced by the continuous benefit from recoveries from legacy stressed assets, which enhances profitability. Lower credit costs have also supported internal capital generation. IDBI Bank’s capitalisation profile has improved, strengthening its loss-absorption capability.
Asset Quality and Vulnerable Loans
IDBI’s vulnerable loan book, consisting of SMA-1 and SMA-2, stood at 1.3% of standard advances as of June 30, 2025. The standard restructured book is also at a manageable level. The bank maintains a contingent provision of ₹1,319 crore (0.62% of standard advances) as of June 30, 2025, providing additional comfort.
Factors Influencing Future Performance
IDBI Bank’s ability to maintain incremental credit costs in check, especially considering the current geopolitical scenario, and the expected compression in net interest margins, will be crucial for sustaining profitability. Recoveries are expected to continue supporting profitability, although the quantum of recoveries is likely to reduce.
Business Growth and Deposits
The bank has experienced steady growth in advances and deposits. As of June 30, 2025, IDBI’s deposit base included a high share of current account and savings account (CASA) deposits, at 44.65%. Total deposit growth has been slow compared to the industry average, with its share in sector deposits declining to 1.3% as of June 30, 2025 from 2.8% as of March 31, 2016, although it has since stabilized.
Rating Withdrawal
ICRA has reaffirmed and withdrawn the rating assigned to the ₹3,000.00-crore infrastructure bonds and ₹302.00-crore senior and lower Tier II Bonds. The rating assigned to the ₹15,994.63-crore senior & lower Tier II bonds and ₹20.00-crore subordinated debt has also been withdrawn at the request of the issuer. This is due to the full redemption of these bonds with no outstanding amount against the same.
Key Financial Indicators
The Return on Assets (RoA) stood strong at 2.02% (annualized) in Q1 FY2026, 1.99% in FY2025 and 1.66% in FY2024.
The Tier I ratio and Capital-to-Risk Weighted Assets Ratio (CRAR) as of June 30, 2025, were 23.71% and 25.39%, respectively.
Liquidity Position
The daily average liquidity coverage ratio (LCR) remained strong at 128.11% for Q1 FY2026, and the net stable funding ratio (NSFR) stood at 119.26%.
Source: BSE
