Union Bank of India has seen its ratings reaffirmed by ICRA Limited across its Basel III Tier II Bonds, Infrastructure Bonds, and Certificates of Deposit (CDs). The bank’s ratings are supported by its strong position as the fifth largest public sector bank and continued sovereign ownership. Furthermore, the rated amount for the Certificate of Deposit programme has been enhanced from ₹35,000 crore to ₹45,000 crore, reflecting confidence in the bank’s liquidity.
Rating Affirmations for Key Instruments
Union Bank of India received reaffirmed ratings from ICRA for its significant debt instruments on March 26, 2026. The rating action signifies continued confidence in the bank’s credit profile, supported by its systemic importance and healthy operational performance.
- Infrastructure Bonds: Reaffirmed at [ICRA]AAA (Stable), with the rated amount remaining at ₹10,000.00 crore.
- Basel III Tier II Bonds: Reaffirmed at [ICRA]AAA (Stable), with the rated amount held steady at ₹5,200.00 crore.
- Certificates of Deposit: The rating was reaffirmed as [ICRA]A1+, with the rated amount enhanced from ₹35,000.00 crore to ₹45,000.00 crore.
The total rated amount across all instruments stands at ₹60,200.00 crore as of the review date.
Key Strengths Supporting Credit Profile
The ratings are anchored by several structural strengths. Union Bank maintains a strong position as the fifth largest public sector bank in India, holding a 74.76% equity stake by the Government of India (GoI), which implies expected capital support if needed. The bank’s capital adequacy remains strong, with the Core Equity Tier I (CET I) ratio at 13.94% as of December 31, 2025, well above regulatory minimums.
The earnings profile is healthy, supported by high provision coverage (84%) and moderation in Non-Performing Assets (NPAs), with Gross NPAs decreasing to 3.06% and Net NPAs to 0.51% by the end of FY2026 (9M). Furthermore, the bank benefits from a well-developed deposit franchise, demonstrated by a high share of retail deposits and a strong liquidity profile, with the Liquidity Coverage Ratio (LCR) remaining robust at 124%.
Areas Requiring Monitoring
Key factors noted for monitoring include the vulnerability of the existing stressed book (SMA-1, SMA-2, restructured accounts) and the bank’s ability to control fresh slippages amidst geopolitical uncertainties. Profitability metrics, such as Net Interest Margins (NIMs), which moderated in recent quarters, are expected to see some improvement in FY2027.
Complexity of Rated Instruments
For investor reference, ICRA has classified the instruments based on the ease of estimating returns:
- Simple Instruments: Infrastructure bonds and Certificates of deposit programme.
- Highly Complex Instrument: Basel III Tier II bonds, which carry equity-like loss-absorption features activated upon the Point of Non-Viability (PONV) trigger by the RBI.
Source: BSE
