Canara Bank announced that ICRA has reaffirmed the credit ratings for its various debt instruments as of February 13, 2026. Notably, [ICRA]AAA(Stable) has been Assigned to the new ₹5,000 crore Basel III Tier II Bonds. Other senior instruments were reaffirmed at the highest possible rating levels, reflecting the bank’s robust capital position, strong franchise, and sovereign backing. One series of Basel III Tier II bonds was reaffirmed and subsequently withdrawn following full redemption.
Credit Rating Update for Canara Bank
Pursuant to regulatory requirements, Canara Bank has received updated credit ratings from ICRA on February 13, 2026. The ratings reflect the bank’s strong standing as the fourth largest Public Sector Bank (PSB) in India, supported by its robust deposit franchise and strong liquidity profile. The ratings remain heavily supported by the Government of India’s (GoI) continued majority ownership of 62.93% and its track record of capital support.
Summary of Rating Actions
The rating action summary highlights stability across most instruments:
- Basel III Tier I Bonds (₹11,000.00 crore): Reaffirmed at [ICRA]AA+(Stable).
- New Basel III Tier II Bonds (₹5,000.00 crore): Assigned the rating of [ICRA]AAA(Stable).
- Existing Basel III Tier II Bonds (₹6,500.00 crore): Reaffirmed at [ICRA]AAA(Stable).
- Certificates of Deposit (₹10,000.00 crore): Reaffirmed at [ICRA]A1+.
- Basel III Tier II Bonds (₹2,400.00 crore): Reaffirmed and subsequently withdrawn following full redemption.
Key Rating Drivers and Rationale
Sovereign Support and Capital Strength
ICRA continues to factor in the GoI’s significant equity stake and its commitment to providing capital infusion if necessary. The bank’s core equity capital (CET I) stood at 12.37% as of December 31, 2025, maintaining a healthy buffer above regulatory requirements. Furthermore, the transition to the Expected Credit Loss (ECL) framework is viewed as manageable given the improved capital position.
Profitability and Asset Quality
The bank’s core operating profitability moderated slightly to 1.59% of ATA in 9M FY2026, yet strong trading gains supported a healthy Return on Assets (RoA) of 1.12% (annualised) for the same period. Asset quality continues to improve, with Gross NPAs declining to 2.08% as of December 31, 2025, down from 3.34% a year prior. However, asset quality remains monitorable due to recent high loan growth.
Deposit Franchise and Liquidity
Canara maintains a strong liquidity profile, evidenced by a daily average Liquidity Coverage Ratio (LCR) of 126.06% in Q3 FY2026. The bank benefits from an extensive network of 10,066 domestic branches. While its deposit growth was healthy at 12.95% YoY as of Q3 FY2026, its domestic CASA base (29.5%) remains relatively lower than the PSB average, impacting the overall cost of funds.
Instrument Specific Considerations
For the Tier I (AT-1) bonds, the rating incorporates the healthy level of distributable reserves available for coupon servicing. Conversely, the ratings for the Tier I bonds carry a one notch lower rating than the Tier II instruments due to equity-like loss-absorption features, including coupon discretion and potential write-down mechanisms based on the CET I ratio reaching 6.125%.
Rating Outlook and Sensitivities
The Stable outlook on the ratings reflects ICRA’s expectation that Canara will sustain a steady credit profile marked by stable asset quality, healthy profitability, and capitalisation. Negative triggers include a sustained RoA below 0.3% or a significant decline in capital cushions relative to regulatory levels.
Source: BSE
