Rationale

 The rating reaffirmation continues to factor in Bank of India’s (BoI) strong capital position as well as the steady improvement in its solvency1 level on the back of the declining net stressed assets level. Further, the capital cushions were strengthened by a capital raise via a qualified institutional placement (QIP) amounting to Rs. 4,500 crore in Q3 FY2024. While the bank has shown its ability to raise capital, the rating continues to factor in its sovereign ownership and the demonstrated track record of capital support from the Government of India (GoI), which is expected to be forthcoming if required. Moreover, the rating considers BoI’s strong resource profile on the back of its robust retail franchise, including the healthy share of low-cost current account and savings account (CASA) deposits, which translates into a granular deposit base and competitive cost of funds. The bank’s overall potential stress book, comprising the overdue and restructured book, has declined gradually from the higher level during the Covid-19 pandemic, though it remains elevated in relation to the core capital. Further, profitability has remained at sub-optimal levels so far and below the public sector banks’ (PSBs) average. A sustained improvement will continue to depend on BoI’s ability to keep slippages and credit costs at lower levels. Moreover, any material weakening in macroeconomic conditions will be a monitorable as it could potentially impact the asset quality and profitability levels. BoI has confirmed that there are no deposits outstanding, which have been mobilised using ICRA’sratings. Hence, at the bank’s request and in accordance with ICRA’s withdrawal policy, the rating is being placed on notice of withdrawal.