Indian Overseas Bank Shares Drop to 52-Week Low Again Amid ₹699 Crore Demand Notice

Shares of Indian Overseas Bank (IOB), a public sector lender, plunged by 5.7% to ₹41.01 on March 3, marking a 52-week low for the second consecutive session. This decline followed the bank's disclosure of a ₹699.52 crore demand notice from the Deputy Commissioner of Chennai over alleged GST liabilities for the assessment year 2020-21.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

GST Demand Notice and Legal Stand

The notice, issued on February 27, 2025, comprises a ₹35.26 crore penalty, along with tax and interest. The demand was triggered by an annual scrutiny of the bank’s GST filings, during which authorities flagged discrepancies.

Despite the notice, IOB remains confident in its legal position. The bank has sought expert legal advice and believes that the demand lacks merit. Consequently, it has taken the legal route to challenge the order and expects the appellate authorities to rule in its favor. The bank also assured that this demand will not have a material impact on its financials, operations, or business activities.

Stock Performance and Market Impact

As of 2:20 pm on March 3, IOB's share price were trading at ₹41.77, down 4.04% from the previous close on the NSE. The stock has declined nearly 16% since the beginning of the year, reflecting investor concerns over regulatory scrutiny and financial liabilities.

Market analysts suggest that the impact of the GST notice on IOB's stock performance could be temporary. If the bank successfully defends its case, investor confidence may recover. However, given the broader market volatility and recent regulatory actions against financial institutions, short-term uncertainty persists.

Financial Performance and Growth Trends

In the third quarter of the financial year 2025 (Q3FY25), IOB posted a consolidated net profit of ₹875.27 crore, a significant increase from ₹724.14 crore in the corresponding quarter of the previous year. The bank’s interest earnings for the quarter stood at ₹7,115.88 crore, reflecting a 15% increase from Q3FY24. Additionally, total income grew by 13% year-on-year to ₹8,415.34 crore.

IOB’s improved financial performance can be attributed to higher credit growth, improved asset quality, and strategic cost management. The bank has also focused on strengthening its digital banking infrastructure, enhancing operational efficiency, and expanding its loan portfolio across retail and corporate segments.

Government Stake and Tax Refund

As of December 2024, the Government of India held a 96.38% stake in IOB, reinforcing its status as a public sector lender. The government’s significant holding has provided stability to the bank, although regulatory scrutiny remains a key risk factor.

In December 2024, IOB secured an income tax refund of ₹1,359.29 crore for the assessment year 2015-16. This refund, including interest under Section 244A, was confirmed in an order dated August 17, 2024. The ruling followed earlier decisions by the Commissioner of Income Tax (Appeals) in March and December 2023, with IOB receiving the official notification via the Income Tax Portal on December 10, 2024.

Future Outlook

Looking ahead, IOB aims to sustain its growth momentum by focusing on expanding its credit portfolio, strengthening risk management practices, and leveraging technology to enhance customer experience. Analysts suggest that the resolution of the GST demand notice will be a key factor in determining short-term stock performance.

Additionally, the bank's improving financial health and strategic initiatives position it well for future growth. However, regulatory compliance and market volatility will continue to be critical aspects influencing investor sentiment.

With the banking sector undergoing rapid transformation, IOB remains focused on capitalizing on emerging opportunities while mitigating potential risks associated with regulatory scrutiny and economic fluctuations.