Bank of Baroda has received a significant credit rating boost with ICRA assigning an AAA (Stable) rating to its Long Term Green Infrastructure Bonds worth Rs. 10,000.00 crore on February 25, 2026. The rating agency also reaffirmed existing ratings across the bank's various debt instruments, reflecting the institution's strong financial position and sovereign backing.

Rating Action Summary

The comprehensive rating action covers instruments totaling Rs. 16,500.00 crore, marking a substantial increase from the previous rated amount of Rs. 6,950.00 crore. The rating agency has also withdrawn the rating for Basel III Tier II bonds worth Rs. 450.00 crore following their complete redemption.

Strong Fundamentals Drive Rating

The ratings continue to factor in Bank of Baroda's sovereign ownership, with the Government of India maintaining a 63.97% equity stake as of December 31, 2025. The bank holds the distinction of being the second largest public sector bank and fourth largest bank in the Indian financial system, commanding a market share of 6.6% in advances and 6.5% in total deposits.

Robust Capital Position

The bank demonstrates strong capitalisation with a CET I ratio of 12.45% and Tier I ratio of 13.10% as of December 31, 2025, excluding 9M FY2026 profit. The solvency level improved to 6.3% from 6.9% in March 2025, supported by high provision cover for stressed assets and steady capital accretion.

Asset Quality Improvements

The bank has demonstrated consistent improvement in asset quality metrics, with gross NPA percentage declining to 2.04% as of December 31, 2025, from 2.43% a year earlier. Net NPA percentage stood at 0.57%, reflecting effective recovery mechanisms and controlled fresh slippage generation at an annualised rate of 1.08% in 9M FY2026.

Superior Liquidity Profile

Bank of Baroda maintains superior liquidity with a daily average liquidity coverage ratio of 126.04% in Q3 FY2026, well above the regulatory requirement of 100%. The bank benefits from a competitive cost of interest-bearing funds at 4.82% in 9M FY2026 and a healthy CASA ratio of 38.45% in domestic deposits.

Outlook and Challenges

The Stable outlook reflects expectations of steady asset quality, internal capital generation, and strong liability profile. However, ICRA notes that net interest margins moderated in 9M FY2026, though they are expected to stabilise and gradually improve from Q1 FY2027. The bank's ability to control fresh slippages and maintain lower credit provisions remains crucial for sustained profitability.

Bank of Baroda has received a comprehensive rating update from Fitch Ratings, with the international credit rating agency reaffirming the bank's existing ratings while upgrading a key metric that reflects the institution's standalone financial strength. The rating action was disclosed under Regulation 30 of SEBI (LODR) Regulations, 2015.

Rating Affirmation and Upgrade Details

Fitch Ratings has maintained its Long-Term Issuer Default Rating for both Bank of Baroda and its subsidiary Bank of Baroda New Zealand at 'BBB-' with a Stable Outlook. Simultaneously, the rating agency has upgraded the bank's Viability Rating to 'bb' from 'bb-', indicating an improvement in the bank's standalone credit profile.

Financial Performance Improvements

The viability rating upgrade is supported by significant improvements in the bank's financial profile. Asset quality has shown marked improvement with the impaired-loan ratio decreasing to 2.00% in 9MFY26 from 2.30% in FY25. Credit costs have eased substantially to 0.30% of loans in 9MFY26 from 0.50% in FY25, while loan loss cover remained steady at 72.00%.

Capital and Liquidity Position

Bank of Baroda's capital position has strengthened significantly with the Common Equity Tier 1 ratio rising to 13.60% in 9MFY26. The net impaired loans to CET1 ratio improved to 6.30% in 9MFY26 from 7.60% in FY24, indicating enhanced capital buffers. Fitch expects the CET1 ratio to settle above 13.00% through FY27.

The bank maintains strong funding and liquidity metrics with deposits constituting 92.30% of total non-equity funding and a liquidity coverage ratio of 116.00% at 9MFY26. The loan-to-deposit ratio of 86.90% represents the highest among Fitch-rated state banks.

Rating Rationale and Outlook

Fitch's rating action reflects the bank's position as India's second-largest state bank with 64.00% government ownership, supporting the high probability of extraordinary state support. The rating agency has revised its outlook on Indian banks' operating environment to positive, expecting reduced sector risks due to enhanced regulation and supervision by the Reserve Bank of India.

The stable outlook on the IDR mirrors that on India's sovereign rating, with Fitch forecasting GDP growth above 6.00% through FY27. The bank's enhanced risk profile, improved underwriting standards, and better loan diversification contribute to the positive assessment.