Indian Overseas Bank expects MTNL account resolution in 2-3 quarters

According to the bank’s investor presentation, the lender reported total slippages of Rs 2,756 crore during Q4FY25, sharply higher than Rs 329 crore a year ago, and Rs 284 crore during a quarter ago.

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Indian Overseas Bank is expecting the defaulted loan of state-run telecom firm MTNL to be resolved in the next two-three quarters, managing director and chief executive officer Ajay Kumar Srivastava told Moneycontrol during an interview.

“We are going to encash it going forward whenever resolution happens, and I think it will happen in next two to three quarters,” Srivastava said.

In January-March quarter, Indian Overseas Bank have seen a sharp jump in its slippages after the large account of state-run telecom firm MTNL got defaulted.

According to the bank’s investor presentation, the lender reported total slippages of Rs 2,756 crore during Q4FY25, sharply higher than Rs 329 crore a year ago, and Rs 284 crore during a quarter ago. Of the total slippages, a majority has come from the MTNL account, part of corporate or other slippages worth Rs 2,330 crore.

Last month, MTNL in a regulatory filing had informed of defaulting on bank loans worth Rs 8,346.24 crore from seven public sector banks. The loss-making public sector telecom firm’s total debt obligations reached Rs 33,568 crore as on March 31, 2025, according to the filing dated April 19.

The total loan default includes Rs 3,633.42 crore of debt raised from Union Bank of India, Rs 2,374.49 crore of Indian Overseas Bank, Rs 1,077.34 crore of Bank of India, Rs 464.26 crore Punjab National Bank, Rs 350.05 crore from State Bank of India, Rs 266.30 crore from UCO Bank and Rs 180.3 crore along with principal and interest payment.

The defaults on loan payment occurred between August 2024 and February 2025.

IOB MD and CEO Srivastava said the bank has made a 100 percent provision on this account from the cushion created on their balance sheet. He added that the money, expected from the resolution of this account, will be added to the profit and loss account of the bank, helping boost the bottom line.

On the margins front, Srivastava said further rate cuts by the Reserve Bank of India (RBI) will have an impact on the margins of the bank. “Some pressure on margin will be there and we will be able to maintain at around 3.5 percent, which means there will be 10-15 basis point (bps) impact in worst case scenario,” he added.

There is a growing consensus among market participants that the RBI will cut more rates in the upcoming MPC reviews in order to support growth amid Trump’s tariff levies, with a cooling inflation providing the elbow room for lower rates.

On April 9, the central bank reduced the key repo rate by 25 bps, the second such cut in a row, on a benign inflation outlook and moderate growth. It also shifted its stance from ‘neutral’ to ‘accommodative’.