Chennai-headquartered Indian Overseas Bank (IOB) is preparing to tap the equity market for Rs 5,000 crore through a qualified institutional placement (QIP), a move that would bring down the Union government’s shareholding in the public sector lender from 92.4% to roughly 86% if the issue is fully subscribed, The Times of India reported on 27 October 2026.
The bank already has approval for the fundraise, and the process is under way, MD and CEO Ajay Kumar Srivastava told the newspaper. The QIP is expected either towards the end of the third quarter or early in the fourth quarter of FY27, with the final timing depending on market conditions.
About public shareholding, not growth capital
Srivastava made it clear that the issue is not driven by a capital shortfall. IOB’s capital to risk-weighted assets ratio (CRAR) stands at 18.6%, and the bank says it continues to add to growth capital every quarter from internal accruals.
The real driver is the requirement to bring the government’s stake down to 75% to meet minimum public shareholding norms. With the Centre holding 92.4%, IOB will need to dilute in phases, and the Rs 5,000 crore QIP is the first step on that path. The bank had put fundraising on hold in FY26 after the West Asia crisis unsettled markets.
IOB is one of a handful of state-run lenders, along with UCO Bank, Central Bank of India and Punjab & Sind Bank, where government ownership remains well above the 75% threshold, making share sales and QIPs a recurring theme for the segment.
Foreign currency funding plans
Alongside the equity raise, the lender is stepping up foreign currency funding. Srivastava said IOB has mobilised $1.2 billion through FCNR(B) deposits and is targeting about $500 million through external commercial borrowings (ECBs) by the end of December 2026. Around $250 million of that has already been finalised and is expected to be drawn within about a week.
Strong quarter as the backdrop
The fundraising plan comes on the back of a strong September quarter. IOB reported a 56% year-on-year rise in net profit to Rs 1,912 crore in Q2 FY27, against Rs 1,226 crore a year earlier. Operating profit grew 25.7% to Rs 3,016 crore, while net interest income rose 26.4% to Rs 3,867 crore. Domestic net interest margin improved 14 basis points year-on-year to 3.5%.
Srivastava added that the bank has not seen any slowdown in loan demand during the festive season.
Why it matters
A successful QIP would widen IOB’s free float, improve liquidity in the stock and give institutional investors a larger say in the lender, while moving it closer to regulatory shareholding norms. How smoothly the issue goes will also be read as a signal for other PSU banks that still need to reduce government ownership over the coming years.
Image: Indian Overseas Bank, Srirangam branch. Sujithshivam511 / Wikimedia Commons (CC BY-SA 4.0)
