Bank of India's asset quality to improve but profitability lags peers

The RAM segment will mainly drive its loan growth but NPL will inch up.

Bank of India is expected to continue improving its risk management and asset quality over the next two years, according to S&P Global Ratings.

The bank has solid deposits backed by high customer confidence, both owing to its established reputation in India and its ownership by the government, the credit rating agency said.

However, its profitability and asset quality lag industry average, and are tempering these strengths, S&P said.

The bank currently holds a 3% to 3.5% market share in loans and deposits as of end March 2026. Its retail, agriculture, and micro, small, and medium-size enterprises (MSME) lending—the RAM segment—is expected to mainly drive the bank’s loan growth as it focuses on improving its loan yields and granularity in lending.

“In our view, retail growth will center on secured loans, predominantly residential mortgages and auto loans. MSME lending is likely to be channeled toward tourism, hospitality, and logistics. In the corporate segment, BOI focuses on midsize companies,” S&P said.

New nonperforming loan (NPL) formation is anticipated to be around 1% over the next two years, compared with a 0.94% annualized rate in the first quarter of fiscal 2027.

BOI is expected to maintain sufficient capitalisation to support its growth, whilst credit costs will remain below the industry average, supported mainly by the recoveries in its loan book, S&P said.

Given government ownership, BOI will also benefit from flight to quality in a stress scenario, said S&P, and the bank is likely to get extraordinary support from the government of India if needed.