Canara Bank Gets Top Credit Ratings from ICRA, Outlook Stable

• Tier II Bonds (₹8,900 crore) – Rated AAA (Stable), which is the highest safety rating.
• Tier I Bonds – AT-1 (₹7,500 crore) – Rated AA+ (Stable), also very safe but one step lower because these bonds can absorb losses in difficult times.
• Certificates of Deposit (₹10,000 crore) – Rated A1+, the best possible rating for short-term borrowings.

These ratings mean Canara Bank is seen as highly trustworthy and very unlikely to default. 

• It is the 4th biggest public sector bank and 6th largest bank among all banks in India
• As of March 2025, it had a 5.8% share in loans and a 6.4% share in deposits across the country.
• It runs nearly 9,861 branches and 7,907 ATMs, reaching deep into both cities and rural areas.

Solid Financial Performance
The bank has shown steady improvement in recent years:

• Profits: ₹17,027 crore in FY2025 (up from ₹14,554 crore in FY2024), and ₹4,752 crore in just the first quarter of FY2026.
• Capital strength: CET-I ratio of 12.29% and CRAR of 16.52% as of June 2025 – both well above RBI’s safety rules.
• Liquidity: LCR of 144.2% and NSFR of 127.3% – far above the 100% required, meaning the bank has more than enough liquid assets.

Bad Loans Under Control
Like most Indian banks, Canara Bank had struggled with bad loans in the past. But things are improving:

• Gross NPAs fell to 2.69% in June 2025, down from 4.14% a year earlier.
• Net NPAs dropped to 0.63%, which is close to the public sector bank average.
• New problem loans have come down sharply, showing that the bank’s loan book is getting healthier.

Why the Ratings are Strong
ICRA highlighted a few key reasons for these positive ratings:

• Government support – The Government of India owns nearly 63% of Canara Bank, which gives strong backing.
• Wide customer reach – Almost 10,000 branches make its deposit base very reliable.
• Good profitability – Profits are growing steadily, even if margins are under a bit of pressure.
• Improving loan book – Bad loans are much lower than before.

Challenges Ahead
At the same time, ICRA pointed out some challenges:

• Low CASA share (29.6%) – Current and Savings Accounts is lower than other banks, so Canara Bank has to pay more on deposits.
• Profit margins under pressure – Falling interest rates may squeeze net interest margins.
• Loan risks – Fast loan growth, especially to MSMEs and retail borrowers, needs careful monitoring.
• New rules – The upcoming Expected Credit Loss (ECL) system could affect profits and capital. 

About ICRA
ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services companies as an independent and professional investment Information and Credit Rating Agency.

Today, ICRA and its subsidiaries form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited Company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit Rating Agency Moody's Investors Service is ICRA's largest shareholder.

Who Uses ICRA
ICRA ratings are used by a diverse range of entities, including investors, such as mutual funds and pension funds, who need to assess risk and make informed investment decisions. Businesses and financial institutions, like banks and brokers, utilize ICRA ratings to evaluate the creditworthiness of other companies and financial instruments for lending and investment purposes. Issuers (companies seeking funding) use them to signal their financial reliability. Furthermore, regulatory bodies and internal risk managers leverage these ratings for capital adequacy, liquidity, and compliance.

Long – Term Rating Scale
ICRA's rating scale ranges from AAA (highest safety, lowest risk) to D (defaulting or expected to default) for long-term ratings, with modifiers like '+' or '-' indicating relative position within a category. Short-term ratings follow a similar scale from [ICRA]A1 (very strong safety) down to D, and can also include the "NRA" (No Rating Assigned) designation for eligible issuers

Significance of ICRA Rating
An ICRA (Investment Information and Credit Rating) rating provides an independent assessment of an entity's creditworthiness, offering investors and lenders insights into the likelihood of timely debt repayment and the associated credit risk. The significance of these ratings lies in their ability to promote informed decision-making for investors, build confidence for lenders, enhance market transparency, and facilitate efficient capital allocation by categorizing borrowers and debt instruments based on their risk levels. 

Outlook
ICRA kept the bank’s outlook as stable, meaning it expects Canara Bank to stay strong with healthy profits, capital, and liquidity.

The only things that could hurt ratings would be:

• A fall in profits for a long period,
• Capital buffers dropping below safe levels, or
• A change in government ownership.

In Summary
Canara Bank has shown steady growth, improving loan quality, and strong government support. Its high safety ratings from ICRA reassure investors and depositors that it remains a safe, reliable, and stable bank in India’s financial system.