India ratings reaffirms IDBI Bank's ratings, withdraws some Basel III bonds

India Ratings and Research has reaffirmed IDBI Bank Limited's long-term rating at 'IND AA/Stable' and short-term rating at 'IND A1+', as announced on September 19, 2025. The reaffirmation covers Basel III-compliant Tier II bonds (reduced to INR19 bn from INR30 bn), senior debt (reduced to INR4 bn from INR36.31 bn), certificate of deposit (INR350 bn), Omni Infrastructure bonds (reduced to INR10 bn from INR70 bn), and fixed deposits (INR0 bn). Basel III compliant bonds totaling INR20 bn have been withdrawn as the bank did not proceed with the instrument as envisaged.

The ratings reflect IDBI Bank's stable operating buffers, robust capital position with a Common Equity Tier 1 (CET1) ratio of 23.71% in 1QFY26, and a stable funding base supported by a CASA ratio of 44.65% in 1QFY26. Asset quality remains comfortable, with gross non-performing assets (NPAs) declining to 2.93% and net NPAs to 0.21% in 1QFY26. The bank's strategic shift towards a granular and retail-centric loan book has increased retail loan share to 70% from 56%, with a significant reduction in slippages.

IDBI's profitability trajectory remains positive, evidenced by a return on assets (RoA) that improved to 2% in 1QFY26, and a net profit of INR20 bn in 1QFY26. The bank's liquidity position is adequate, with a liquidity coverage ratio of 128.11% in 1QFY26. However, the unresolved home loan business issue, with extended accommodation, remains a weakness to monitor.