ICRA has reaffirmed the [ICRA]AAA (Stable) rating for Union Bank of India’s infrastructure bonds and Basel III Tier II bonds, and the [ICRA]A1+ rating for its Certificates of Deposit. These affirmations reflect the bank’s strong position as the fifth largest public sector bank, healthy earnings, robust capital cushions comfortably above regulatory levels, and a well-developed deposit franchise. The ratings are strongly supported by the bank’s sovereign ownership, with the Government of India holding a 74.76% equity stake.
Rating Action Summary and Rationale
On March 13, 2026, ICRA confirmed its ratings for Union Bank of India, citing continued strong support from its sovereign ownership and demonstrated ability to maintain healthy financial performance. The ratings factor in the bank’s strong systemic importance, evidenced by its 5.0% market share in net advances as of December 31, 2025, following the merger with Corporation Bank and Andhra Bank.
Key Rating Strengths
Sovereign Support and Market Position: The Government of India (Gol) remains the majority shareholder (74.76%). ICRA anticipates continued support from the Gol if required, bolstering confidence in the bank’s stability. The bank’s systemic importance is highlighted by its substantial deposit base of Rs. 12.23 lakh crore.
Capitalization and Solvency: Capital ratios remain strong. The CET I ratio stood at 13.94% and the Tier I ratio at 15.06% as on December 31, 2025, improving from the previous year. This strength is supported by healthy internal accruals, with an annualised Return on Net Worth (RoNW) of 15.64% in 9M FY2026. The solvency level also improved to 5.10%.
Healthy Earnings Profile: Operating profitability remains sound, with the annualised Return on Assets (RoA) at a healthy 1.20% in 9M FY2026. Despite a moderation in Net Interest Margins (NIMs) during recent quarters, trading gains provided significant support to overall profitability.
Liquidity Position: The liquidity profile is deemed Strong, supported by positive cumulative mismatches in the near-term bucket and a high share of core deposits. The Liquidity Coverage Ratio (LCR) stood strong at 124% in Q3 FY2026.
Key Rating Challenges and Monitorables
Asset quality, while improving, remains a monitorable area. Gross NPAs (GNPA) moderated to 3.06% and Net NPAs (NNPA) to 0.51% as of December 31, 2025. ICRA will continue monitoring the bank’s ability to limit slippages from the vulnerable book and manage potential impacts from macroeconomic shocks on borrowers, especially MSMEs.
Summary of Rating Action
| Instrument | Previous Rated Amount (Rs. crore) | Current Rated Amount (Rs. crore) | Rating Action |
|---|---|---|---|
| Infrastructure bonds | – | 10,000.00 | [ICRA]AAA (Stable); assigned |
| Basel III tier II bonds | 5,200.00 | 5,200.00 | [ICRA]AAA (Stable); reaffirmed |
| Certificates of deposit | 35,000.00 | 35,000.00 | [ICRA]A1+; reaffirmed |
| Total | 40,200.00 | 50,200.00 |
The total rated amount increased from Rs. 40,200 crore to Rs. 50,200 crore, primarily due to the assignment of a new rating for Rs. 10,000 crore in Infrastructure Bonds.
Rating Stability Outlook
The Stable Outlook reflects ICRA’s expectation that Union Bank will maintain a steady credit profile, supported by stable asset quality, healthy profitability, and adequate capitalization over the near-to-medium term.
Source: BSE
