S&P Global Revises Bank of Maharashtra Credit Ratings | Latest Updates

On 24–25 September 2025, global rating agency S&P Global Ratings assigned a BBB- long-term and A-2 short-term issuer credit rating to Bank of Maharashtra, marking a notable vote of confidence in the bank’s financial stability and governance. This move is widely viewed as a signal that the lender has crossed a threshold of institutional maturity and resilience.

This article delves into what underlies this rating action, how Bank of Maharashtra stacks up against peers and the systemic environment, what it means for its cost of capital and investor perception, and what risks could be lurking ahead. Finally, we will assess whether this rating is sustainable or subject to downgrades, and what strategic measures the bank must prioritize.

The S&P Rating: Rationale & Key Assumptions

S&P’s decision to assign a BBB- / Stable rating to BOM comes after a detailed evaluation of the institution’s standalone strength and its perceived linkages to sovereign support.

Standalone Credit Profile and Government Support
 

• The bank’s Stand-Alone Credit Profile (SACP) was assessed at bbb-, which is one notch below the final issuer rating. The higher overall rating assumes a “very high likelihood” of extraordinary government support in the event of distress, given BOM’s status as a public sector bank.
   
• S&P notes that the long-term rating is one notch above the SACP because it factors in that implicit support buffer.

Key Financial Metrics and Projections

Several metrics underpin the rating decision:

• Loan growth forecast: S&P expects the bank to grow advances by 14%–15% per annum over the next two years, reflecting confidence in demand and lending capacity.
   
• Capital adequacy / RAC ratio: The agency projects the Risk-Adjusted Capital (RAC) ratio to strengthen to 10.5%–11% from about 10% (neutral for a sovereign rating at “BBB”) over the next two years.
   
• Asset quality and provisioning cushion: The bank has demonstrated improving stability in its non-performing assets (NPAs) and provisioning coverage, reducing volatility in credit costs.
   
• Liquidity and funding: A solid deposit base, favorable funding mix, and prudent liquidity buffers enhance its short-term stability.

Upside and Downside Scenarios

S&P outlines clear triggers for further rating actions:

• Upside: A possible upgrade would depend on an upward revision of India’s sovereign rating and a re-assessment of BOM’s standalone credit strength.
   
• Downside: A downgrade could follow if (a) India’s sovereign rating is cut, or (b) BOM’s RAC ratio falls sustainably below 10%, especially if ambitious credit growth isn’t matched by capital infusion.

In summary, the rating reflects a balanced view: acknowledging strong fundamentals and foreseeable risks, but anchored by the safety net of state support.

Bank of Maharashtra: Fundamentals, Strengths, and Challenges

To fully appreciate the rating action, one must examine BOM’s operating context, strengths, and areas that require vigilance.

Institutional Profile & Reach

Bank of Maharashtra, founded in 1935 and nationalised in 1969, is a public sector bank headquartered in Pune. As of June 2025, it has 2,641 branches and over 14,500 employees. The Government of India holds a majority stake (around 79.6%).

Strengths
 

1. Improving profitability: In recent quarters, BOM has reported healthy growth in net profit (for example, a 23% year-on-year increase cited around the rating announcement).
    
2. Capital buffer and provisioning discipline: The bank holds respectable capital buffers and has shown discipline in provisioning, which cushions it against downside surprises.
    
3. Prudent credit selection: Despite ambitious growth projections, the bank has avoided sudden surges in high-risk loans, and improvement in NPAs has been gradual but steady.
    
4. Stable deposit franchise: With a diversified and growing deposit base, BOM is less reliant on volatile borrowings, which helps maintain funding stability.

Challenges & Structural Risks
 

1. Capitalization pressure: To sustain high growth, periodic capital infusions might be necessary. If these do not materialize timely, capital ratios could erode.
    
2. Macro-sensitivity: The bank remains exposed to broader macro shocks (agriculture, SMEs, commodity cycles), which could stress asset quality.
    
3. Sovereign ceiling constraint: The rating cannot exceed the sovereign ceiling. Even if BOM’s fundamentals improve drastically, any rating upside is constrained unless India’s sovereign rating improves.
    
4. Competition & margins: Intense competition from private banks and NBFCs may compress margins, especially in retail loans.

Peer & System Comparison

To place BOM’s rating in perspective, it is instructive to compare with other public sector banks and how they are rated across parameters.

Below is a table comparing BOM and select peer banks on credit ratings, capital ratios, and asset quality metrics.

Selected PSU Banks – Ratings and Key Metrics

(Note: Data are indicative and compiled from publicly available sources as of 2025.)
 

Varying provisioning cushion

Peer PSU average

Around BBB- / stable to BB+

Moderate

Elevated in stress segments

Moderate to high

The table underscores that BOM now sits among the higher-rated PSU banks, with credit metrics broadly healthy. While it does not lead in every metric, the combination of improved capital buffers, gradually reducing asset stress, and stable deposit funding positions it favorably.