Indian Overseas Bank (IOB) posted its highest-ever quarterly net profit of ₹1,365 crore in the third quarter. MD & CEO Ajay Kumar Srivastava tells Narayanan V on the factors driving retail loan growth and profitability, the potential impact of US tariffs on the bank’s business, and the lender’s preparedness for the Expected Credit Loss (ECL) framework. Excerpts:
What factors contributed to advances growth in Q3?
Our advances growth was primarily driven by strong traction in retail and agriculture loans. Our retail book grew by 43% to ₹83,838 crore during the quarter, mainly led by housing loans, vehicle loans, loans against property, and to some extent, jewel loans. The gold loan portfolio grew by 30–35% and has been performing well due to rising gold prices. Our agricultural advances also rose 35% to ₹92,996 crore, and we are planning to close the agri book at ₹1 lakh crore by March 2026. Our MSME book increased by 17% to ₹50,635 crore.
Do you see any stress in the MSME book due to US tariffs?
Not just MSME, we have assessed the impact of US tariffs on our entire credit portfolio. Based on our assessment, there is no single product or sector under stress as of now. Textile and shrimp export businesses are segments where we have exposure. For the time being, exporters have made some temporary arrangements in the hope that the 50% tariff issue will be resolved. Their observation is that if the tariff stretches beyond March, some adverse impact could be visible in the first half of the next financial year, and we may see some stress. Since everyone understands the dynamics, exporters are also finding new markets, and many of them are in advanced discussions, with some having already started.
How is IOB preparing to implement ECL norms?
The ECL guidelines will be effective from April 1, 2027. We assume that once implemented, the provisioning requirement will increase. We have made some calculations based on the draft ECL guidelines issued by the regulator and understand that IOB will need an additional provision requirement of around ₹2,500 crore. Out of this, we have already created forward-looking ECL provisions of ₹1,500 crore in the December balance sheet. The remaining ₹1,000 crore provision for ECL will be created in subsequent quarters so that when the guidelines take effect in April 2027, we are ready to absorb the entire additional provision requirement in one go.