EconomyBanking
RBI inspection trims Indian Overseas Bank's capital ratio to 19.06% over risk-weight lapses
The central bank found the Chennai-based lender had under-applied risk weights on syndicated foreign-currency loans and some undisbursed exposures. The bank says its profit is unaffected.
Key points
- The RBI's assessment raised IOB's risk-weighted assets by about ₹7,392 crore as of 31 March 2026.
- The bank's total capital adequacy ratio falls to 19.06% from 19.78% on the RBI's numbers.
- IOB says the observations have no impact on its net profit and its ratios stay above the minimum.
The Reserve Bank of India has found that Indian Overseas Bank understated the risk on parts of its loan book, and the central bank’s calculation cuts the state-owned lender’s capital adequacy ratio by about 0.7 percentage points, the bank has told the stock exchanges.
The findings came from the RBI’s Inspection for Supervisory Evaluation for 2026 and relate to the bank’s books as of 31 March 2026. On the RBI’s assessment, IOB’s risk-weighted assets were ₹2,05,323.69 crore, against the bank’s own figure of ₹1,97,931.60 crore, a difference of about ₹7,392 crore.
That pushes the total capital to risk-weighted assets ratio down to 19.06% from 19.78%. The core equity ratio falls to 16.32% from 16.94%, and the leverage ratio edges down to 6.58% from 6.60%. Capital itself is reduced by just ₹10 crore.
Where the risk was missed
The RBI listed four areas in which the required risk weights were not applied. Two concern foreign-currency corporate loans arranged through syndication, where the external credit rating either did not cover the whole syndicate exposure or did not name the lead bank.
The third covers loans bought under secondary syndication arrangements from banks that do not operate in the host country. The fourth relates to undisbursed amounts on accounts whose master record had not been opened in the bank’s core banking system, which meant total exposure was under-reported.
The bank’s response
IOB said the RBI’s assessment has no impact on the net profit it reported for the year to March 2026. Its core equity and total capital ratios remain well above the regulatory minimums of 5.50% and 11.50%.
The bank added that it has already built the RBI’s observations into its risk-weighted assets and capital ratios for the quarter that ended on 30 September 2026.