Canara Bank Gets ICRA AAA Rating for Tier II Bonds; ₹11,000 Crore AT1 Bonds Reaffirmed at AA+

Mumbai, February 13, 2026 – Canara Bank has received a clean chit from ICRA , with the rating agency assigning its highest ** [ICRA]AAA (Stable)** rating to the bank's fresh Basel III Tier II bonds of ₹5,000 crore. The agency has also reaffirmed ratings for the bank's other debt instruments, including AT1 bonds and certificates of deposit.

The public sector lender informed stock exchanges today about the latest rating action from ICRA, a Moody's affiliate.

Rating Actions at a Glance

₹2,400 crore Tier II bonds fully redeemed; rating withdrawn accordingly

Why These Ratings Matter

1. Highest Safety Rating for Tier II Bonds
The ** [ICRA]AAA** rating is ICRA's highest grade, indicating the lowest credit risk. For investors, Canara Bank's Tier II bonds are among the safest investment options in the debt market.

2. Sovereign Ownership Key Factor
ICRA explicitly cited Canara's sovereign ownership (GoI holds 62.93% stake) and demonstrated capital support from the government as primary rating drivers. The bank has not required government capital infusion for the last four fiscals, remaining self-sufficient through internal accruals.

3. Strong Financial Metrics

• CET1 ratio: 12.37% (as on December 31, 2025)

• Gross NPA: Improved to 2.08% (from 3.34% a year ago)

• Net NPA: 0.45%

• Return on Assets (RoA): 1.12% (annualized) in 9M FY2026

• Provision coverage ratio: Comfortable levels for legacy stressed assets

4. AT1 Bonds: One Notch Lower
The ** [ICRA]AA+** rating on AT1 bonds reflects their unique loss-absorption features. These perpetual instruments carry:

• Non-cumulative, discretionary coupon payments

• Write-down risk at pre-specified trigger points (CET1 below 6.125%)

• Higher loss severity compared to senior debt

However, ICRA notes that Canara's distributable reserves (9.4% of RWAs) provide comfort for coupon servicing.

What ICRA Said

*"The ratings factor in Canara's sovereign ownership and its strong franchise with a market share of 5.91% in net advances and 6.55% in total deposits. The ratings are further supported by Canara's robust deposit franchise, resulting in a well-developed retail deposit base and a strong liquidity profile."*

The agency expects Canara to generate sufficient internal accruals to meet growth capital requirements while maintaining healthy buffers above regulatory levels.

Asset Quality Trends

The residual vulnerable book (SMA accounts and restructured advances) has witnessed sustained improvement.

Liquidity Position: Strong

• Liquidity Coverage Ratio: 126.06% (well above 100% requirement)

• Net Stable Funding Ratio: 129.6%

• Branch Network: 10,066 domestic branches

• CASA Ratio: 29.5% (improvement expected to 32% in FY26)

What This Means for Investors

ICRA's Outlook

The Stable outlook reflects ICRA's expectation that Canara will maintain:

• Steady credit profile

• Stable asset quality

• Healthy profitability and capitalization

Negative triggers would include:

• Change in sovereign ownership

• RoA falling below 0.3% on sustained basis

• Capital cushions dropping below 100 bps over regulatory levels

• Weakening of distributable reserves for AT1 coupon payment

Conclusion: Canara's Credit Story Remains Robust

With AAA ratings reaffirmed/assigned across Tier II instruments and strong fundamentals across profitability, asset quality, and capitalization, Canara Bank continues to enjoy the highest credit confidence. The government backing provides an additional layer of comfort for investors.