Canara Bank confirmed receiving updated credit ratings from India Ratings & Research on February 13, 2026. The agency affirmed the Issuer Rating at IND AAA/Stable for Infrastructure Bonds (INR 100 billion). Notably, the new Basel III Tier 2 Instruments (INR 50 billion) were assigned an IND AAA/Stable rating. Existing Basel III Tier 2 Instruments and AT1 Bonds were mostly affirmed, reflecting the bank’s systemically important status and expected government support.
Credit Rating Update for Canara Bank
On February 13, 2026, Canara Bank informed the stock exchanges that it received updated credit ratings from India Ratings & Research (Ind-Ra). These ratings reflect the bank’s strong systemic importance and anticipated support from the Government of India (GoI).
Summary of Rating Actions
The rating agency undertook a review across the bank’s debt instruments, resulting in the following key actions:
- Issuer Rating: Affirmed at IND AAA/Stable.
- Infrastructure Bonds (Size: INR 100 billion): Affirmed at IND AAA/Stable.
- Basel III Tier 2 Instruments (Size: INR 75 billion, reduced from INR 99 billion): Affirmed at IND AAA/Stable.
- New Basel III Tier 2 Instruments (Size: INR 50 billion): Assigned rating of IND AAA/Stable.
- Basel III AT1 Bonds (Size: INR 120.0 billion, reduced from INR 149.361 billion): Affirmed at IND AA+/Stable.
Key Drivers Supporting the Rating
The rating strength is fundamentally linked to several key factors:
Strengths
- High Systemic Importance: Ind-Ra recognizes Canara Bank’s large, pan-India franchise.
- Capital Buffers: Capital adequacy is viewed as adequately placed, with internal accruals improving performance.
- Profitability and Asset Quality: High Provision Coverage Ratio (PCR) provides comfort. Non-performing assets (NPAs) fell to 4.23% in 9MFY26, with provisioning coverage improving.
- Operational Metrics: Stability in operational metrics, supported by manageable Net Interest Margins (NIMs) moderating to 2.80% in 9MFY26.
Rating Considerations for Hybrid Instruments
For the Additional Tier 1 (AT1) instruments, the agency factored in the discretionary component, coupon omission risk, and conversion risk, differentiating them from senior debt due to a higher probability of ultimate loss for investors.
Liquidity and Solvency Position
The bank’s liquidity is termed Adequate. At end-4QFY25, the bank maintained a funding gap of 5.0%, with 24.8% of total assets held in RBI balances and government securities. The consolidated Liquidity Coverage Ratio (LCR) stood at a comfortable 151.1% in 4QFY25.
Key financial indicators show growth, with Total Assets reaching INR 16,828.50 billion in FY25. The CET I ratio was 12.0% internally, and the Capital Adequacy Ratio was maintained at 16.3% for FY25.
Rating Outlook Sensitivity
The outlook remains stable, with Positive rating changes deemed Not applicable at this time. A Negative rating action would likely stem from a material decline in the bank’s market share or deposit franchise, indicating a dilution in the GoI’s support stance.
Source: BSE
