Why Bank of Baroda is selling ₹2,776 Crore in Bad Loans Right Now?

Key Takeaways 

• Bank of Baroda has put up ₹2,776 crore of stressed loans across 41 accounts for sale via the Swiss Challenge Method. Nine accounts are tagged as fraud.
   
• Bank of Baroda posted an 11.2% rise in net profit to ₹5,616 crore in Q4 FY26. Its Gross NPA ratio improved to 1.89%, down from 2.26% a year ago. This sale is a direct continuation of that clean-up push.

Bank of Baroda (BoB) has invited bids from Asset Reconstruction Companies (ARCs) and NBFCs to buy stressed loans worth ₹2,776 crore. The sale spans 41 accounts across sectors like power, infrastructure, real estate, textiles, and media. 

The bank will conduct this on a 100% cash basis under the Swiss Challenge Method, where a base bid is first set. Then other parties are invited to beat it.

Nine of these 41 accounts carry fraud tags. These include names like Ushdev International, Nirmal Lifestyle, Abhijeet Projects, and Pixion Media. 

The recovering value from fraud-tagged accounts is notoriously difficult. Buyers will likely demand steep discounts, which could mean the bank absorbs significant haircuts on these loans.

What Does This Mean for Indian  Borrowers?

This matters for common depositors and taxpayers. Bank of Baroda is a public sector bank. Its health directly affects millions of account holders and the broader economy. A cleaner balance sheet means the bank can lend more freely to businesses, farmers, and homebuyers.

If the bank accepts very low recovery values on these bad loans, it may need higher provisions. BoB’s provisions surged 103% year-on-year in Q4 FY26, which already raised questions about sustainability. More haircuts could weigh on profits in the quarters ahead.

Experts Weigh In: Cleanup Move or a Risky Bet?

Analysts have broadly welcomed this step as part of BoB’s ongoing asset quality improvement drive. The bank’s Gross NPA ratio fell to 1.89% in FY26 from 2.26% in FY25, and its Net NPA ratio also declined to 0.45% from 0.58%. Selling legacy stress is a logical next step. 

However, market watchers note the real test lies in the recovery rate. The bank's provision coverage ratio stood at an impressive 92.73% in December 2025, offering some buffer.

 But fraud-tagged accounts tend to attract very low bids. The actual haircut on the ₹2,776 crore pool will be the true measure of this exercise’s success. Investors will be watching whether the Swiss Challenge process draws competitive bids or results in a distressed sale. 

Conclusion

Bank of Baroda’s decision to sell ₹2,776 crore in stressed loans is a step in the right direction. It signals discipline and intent to shed legacy problems. The bank’s global business has already crossed the ₹30 lakh crore milestone, with global advances growing 16.2% year-on-year. 

A leaner balance sheet will support that growth story going forward. The real outcome depends on who bids, how much, and whether the fraud-tagged accounts find any meaningful buyers at all.

FAQs

Q1. Is Bank of Baroda still a good long-term stock after selling ₹2,776 crore in bad loans?
Bank of Baroda still looks relatively strong compared to many PSU banks because its Gross NPA ratio has improved, and profits are growing. The stressed loan sale is part of its balance sheet clean-up strategy, which can support future growth if recoveries remain healthy. However, investors will closely watch how much loss the bank takes on these bad loans and whether fraud-linked accounts lead to bigger provisioning pressure later.

Q2. Why did Bank of Baroda stock dip despite improving NPAs and profits?
The recent dip appears more linked to concerns around stressed loan recoveries and rising provisions rather than a major structural problem. While BoB’s valuation remains low compared to many banking peers, investors are cautious because fraud-tagged accounts often result in large haircuts. The market now wants clarity on how much value the bank can actually recover from the ₹2,776 crore loan sale.