S&P Global Ratings has assigned Bank of Baroda a long-term issuer credit rating of ‘BBB’ and a short-term rating of ‘A-2’, maintaining a stable outlook. The rating reflects the very high likelihood of extraordinary support from the Government of India, which underpins the bank’s credit quality. The bank’s solid funding profile and well-established franchise also support its credit strength over the next two years.
S&P Global Confirms Bank of Baroda Ratings
On February 27, 2026, S&P Global Ratings confirmed its credit assessment for Bank of Baroda, assigning a long-term issuer credit rating of ‘BBB’ and a short-term rating of ‘A-2’. The outlook on the long-term rating remains stable, reflecting S&P’s view that the bank will sustain its financial strength over the next two years.
Rationale: Government Support and Franchise Strength
The ratings are primarily based on the expectation of a very high likelihood of timely and sufficient extraordinary support from the Government of India if required. Bank of Baroda’s crucial role as a public sector bank promoting financial inclusion, coupled with the government’s majority ownership and control, solidify this linkage.
The starting point for the rating—the Stand-Alone Credit Profile (SACP)—is assessed at ‘bbb-‘, matching the rating for banks operating predominantly in India, where more than 80% of the bank’s loan exposure resides.
Operational Performance Projections
Bank of Baroda benefits from a well-established franchise and a solid, granular deposit base, which is key to its strong funding profile. The bank is among the 10 largest players in India, holding a 5%-6% market share in loans and deposits.
- Profitability: Return on average assets (ROAA) is forecast at 1.0%-1.2% over the next two years, comparable to public sector peers but lagging major private sector competitors.
- Growth: Loan growth is forecasted at 13%-14% per annum, driven primarily by the higher-yielding retail, agriculture, and micro, small, and midsize enterprise (RAM) segment.
- Capitalization: The bank is expected to maintain its risk-adjusted capital ratio above 7% over the next 12-24 months, supported by internal capital generation. A planned equity capital raising of INR 85 billion via qualified institutional placement by fiscal 2028 could further bolster capitalization.
- Asset Quality: Asset quality is expected to remain largely stable, with credit costs estimated at 0.6%-0.7% of total loans over fiscals 2026-2028.
Outlook and Potential Rating Drivers
The stable outlook mirrors that of the sovereign rating. The bank is expected to continue benefiting from its franchise and maintain adequate risk management.
A downside scenario could arise if India’s sovereign rating is lowered or if the bank’s SACP weakens materially, particularly concerning risk management or funding profile deterioration compared to industry peers.
An upside scenario would be linked to an upgrade of India’s sovereign rating, given the current view of very high government support.
Source: BSE
