Bank of Baroda has received new credit ratings from S&P Global Ratings, marking a significant development for the public sector bank. The rating agency assigned BBB long-term and A-2 short-term issuer credit ratings to the bank on February 27, 2026, with a stable outlook reflecting confidence in the institution's financial strength and government backing.

Rating Details and Government Support

The credit ratings are underpinned by S&P's assessment of a very high likelihood that the government of India would provide Bank of Baroda with timely and sufficient extraordinary support in the event of financial distress. This view is based on the bank's very important role as a public sector bank in promoting financial inclusion through increased access to deposits and lending, combined with very strong links to the government via majority ownership and control.

Financial Strengths and Market Position

Bank of Baroda maintains a sizable franchise across India, ranking among the 10 largest players with a meaningful market share of 5%-6% of loans and deposits in the fragmented banking industry. The bank's credit profile is supported by its well-established franchise, solid deposit base backed by high customer confidence owing to government ownership, and ample liquidity position.

S&P forecasts the bank's return on average assets (ROAA) at 1.00%-1.20% over the next two years, comparable to several public sector banks though lagging major private sector players. The bank's focus on the higher-yielding retail, agriculture, and micro, small, and midsize enterprise (RAM) segment will predominantly support its net interest margin, though this could be somewhat tempered by thinner margins in international business.

Capital and Growth Projections

The rating agency expects Bank of Baroda to maintain its risk-adjusted capital ratio above 7.00% over the next 12-24 months amid above-average credit growth. This will be mainly supported by steady internal capital generation. The board has approved an equity capital raising plan worth INR 85 billion via qualified institutional placement by fiscal 2028, which if executed would further bolster the bank's capitalization.

Asset Quality and Risk Management

S&P expects Bank of Baroda's asset quality to remain largely stable over the next two years amid favorable operating conditions in India. The bank's adequate risk management, solid recoveries, and upgradation and write-offs of bad loans should keep the gross nonperforming loan ratio largely on an improving trajectory. The rating agency estimates credit costs at 0.60%-0.70% of total loans over fiscals 2026-2028, with the bank maintaining a floating provision of about INR 10 billion towards expected credit loss provisioning.

Funding Profile and Liquidity Position

As a government-owned bank, Bank of Baroda benefits from higher depositor confidence, with its deposit base primarily composed of granular retail deposits and stable, relationship-driven public-sector and large corporate deposits. Current and savings account deposits contribute about 39.80% of the bank's total deposits, higher than several domestic peers. The bank's loan-to-deposit ratio stands at 86% as of end December 2025, moderately weaker than the industry average mainly due to higher loans in its international business.

Outlook and Rating Scenarios

The stable rating outlook reflects S&P's expectation that Bank of Baroda will continue to benefit from its established franchise and maintain adequate risk management over the next two years. The agency expects capitalization to remain supported by steady internal capital generation amid above-average credit growth and a solid funding and liquidity profile. Potential rating changes would primarily depend on changes to India's sovereign rating or material deterioration in the bank's risk management and asset quality.

Bank of Baroda has received reaffirmation of its CARE AAA; Stable rating for bonds and Green infrastructure bonds, along with CARE A1+ rating for Certificate of Deposits from CARE Ratings on February 27, 2026. The rating agency also enhanced the bank's Certificate of Deposit limit significantly while maintaining confidence in the public sector bank's financial strength and government backing.

Rating Actions and Enhanced Limits

CARE Ratings reaffirmed ratings across multiple instruments with a notable enhancement in Certificate of Deposit limits:

The significant enhancement of Certificate of Deposit limits from ₹20,000 crore to ₹1,10,000 crore demonstrates the rating agency's increased confidence in the bank's short-term funding capabilities and liquidity management.

Government Support and Franchise Strength

The ratings continue to factor in the Government of India's majority ownership of 63.97% stake as of December 31, 2025, and expected continued support given the bank's systemic importance. Bank of Baroda's established franchise spans over 11 decades of operations, making it one of the largest nationalised banks in terms of assets and business outreach.

The bank maintains an extensive network of 8,508 branches (84 international and 8,424 domestic), 9,316 ATMs, 1,671 cash recyclers, and over 75,000 employees as of March 31, 2025. This infrastructure serves over 140 million customers globally, providing substantial deposit mobilisation capabilities at competitive rates.

Strong Financial Performance Metrics

Bank of Baroda demonstrated robust financial performance with consistent growth across key metrics:

Net profit grew by approximately 10% to ₹19,581 crore in FY25 from ₹17,789 crore in FY24, while total income increased to ₹138,089 crore. However, Net Interest Margin witnessed some pressure, declining to 2.56% in 9M FY26 due to faster repricing of advances compared to deposits.

Asset Quality and Capitalisation Improvements

Asset quality parameters showed significant improvement with Gross NPA ratio declining to 2.04% as of December 31, 2025, from 2.92% as of March 31, 2024. Net NPA ratio improved to 0.57% as of December 31, 2025, demonstrating effective asset quality management.

The bank maintains comfortable capitalisation levels with Capital Adequacy Ratio of 17.19% as of March 31, 2025, well above the minimum regulatory requirement of 11.5%. This provides adequate cushion for future growth and potential asset quality pressures.

Growth Strategy and Market Position

Advances growth remained robust at 12.83% in FY25, with the bank focusing on retail, agriculture, and MSME segments that constituted approximately 47% of global gross advances as of March 31, 2025. Total deposits grew by approximately 11% to ₹1,472,035 crore in FY25, outpacing industry growth of 10.4%.

CARE Ratings maintains a stable outlook, expecting Bank of Baroda to continue steady growth in advances and deposits while maintaining stable asset quality and comfortable capitalisation levels. The rating agency expects some pressure on Net Interest Margin in FY26 due to faster repricing of advances compared to deposits.

Source: None/Company/INE028A01039/c4436a2b-732d-4d10-a4b8-a4893b9eba5e.pdf