State-owned lender Indian Overseas Bank may seek additional time to comply with the regulatory requirement of bringing down the government’s stake to 75% by August 1, as the bank plans a calibrated dilution through market issuances.

The bank said it will explore a combination of qualified institutional placements (QIPs) and potential offers for sale (OFS) in the next financial year to gradually bring down the government’s holding.

“While reaching the 75% mark by the August 1 deadline remains challenging, we are committed to this transition and, if necessary, will engage with the government to discuss a timeline extension to ensure the dilution is executed smoothly,” Managing Director & Chief executive Ajay Kumar Srivastava said.

Government’s shareholding in the lender

Over the past year, the government’s shareholding in the lender has already declined from over 96% in early 2025 to about 92.44% currently. Following the proposed Rs 4,000-crore QIP, the holding is expected to fall further to around 88% by the end of the current fiscal.

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The bank said it has secured the necessary approvals from the government and the Reserve Bank of India to raise up to Rs 4,000 crore through a QIP. The process, including the appointment of merchant bankers, is currently underway, and the lender intends to tap the market within the current quarter before the end of March 2026.

S&P Global Ratings recently assigned the bank an investment-grade issuer credit rating of ‘BBB/Stable/A-2’, with a ‘bbb-’ stand-alone credit profile. It said the rating reflects its strong capitalisation, funding base and liquidity, along with what the rating agency described as a “very high likelihood” of government support.

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Indian Overseas Bank on rating

According to the lender, the rating also reflects its improving financial performance, citing a record net profit of Rs 1,365 crore in the December quarter of FY26 and a decline in the slippage ratio to 0.5% from 2.9% in FY23. The rating is expected to strengthen the bank’s funding profile and support its planned capital raise.