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PSU banks deliver a steady performance

ICICIdirect Research 23 Jan 2026 DISCLAIMER

PSU Banks like Indian Bank and Bank of India delivered a steady operating performance in Q3FY26, supported by healthy business growth, margin stability and further improvement in asset quality.
Gross advances for both grew ~14% YoY, led by sustained traction in the RAM portfolio, while deposits rose 12-13% YoY, with the CASA ratio of about 38-39%.
NIM improved 5 bps sequentially to 3.28% for Indian Bank while for Bank of India its improved by 16bps, aided by deposit repricing, improving yield dynamics and CRR benefits.
Asset quality continued to strengthen for both, with GNPA/NNPA improving to 2.23%/0.15% for Indian bank. GNPA/NNPA improved to 2.26%/0.60% for Bank of India. 
Overall performance was in line with management guidance. While the conservative provisioning stance may limit near-term expansion in return ratios, it will strengthen balance sheet resilience ahead of ECL implementation. Asset quality is expected to remain benign and continued focus on digital initiatives and granular CASA accretion should aid operating efficiency over the medium term.
Both are expected to deliver stronger loan growth in the coming quarters, aided by a healthy disbursement pipeline and improving retail-to-corporate mix
We have a hold rating on both with target of ₹170 on Bank of India and ₹900 on Indian Bank

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