Fitch Affirms Bank Of Maharashtra's Rating, Ups Risk Profile Outlook

Fitch Ratings on Thursday affirmed Bank of Maharashtra’s long-term issuer default rating at BBB- with a stable outlook. The ratings agency also raised the bank’s viability rating by one notch to bb- on the back of an improved risk profile.

“We have revised BOM’s risk profile score to b+ from b, reflecting its improved underwriting and diversified loan mix, clean-up of legacy bad loans, and minimal exposure to unsecured retail loans,” Fitch said in a release.

The bank’s focus on granular loan categories and sound portfolio characteristics helps mitigate risks, despite its history of cyclical growth and weaker asset quality during stressed periods, the release said.

Fitch said any further upgrade to the viability rating would depend on sustained improvements in risk management and continued strong financial metrics.

The ratings agency also upgraded the bank’s asset quality score to bb- from b+, citing a sustained improvement in its bad loan ratio, which fell to 1.8% in April–December from 7.2% in 2020–21. Fitch expects the ratio to stay near 2% until 2026-27, supported by a favourable macro environment and India’s GDP growth forecast of over 6% in both 2024-25 and 2025026.

The bank’s stable deposit base supported its funding and liquidity profile, while profitability peaked in 2024-25. Fitch expects the bank’s operating profit to risk-weighted assets ratio to moderate to around 3% in 2025-26 from 3.5% in April–December.

A capital infusion of  ₹35 billion in October, along with higher profits, helped the bank grow its capital base faster than deposits.

Fitch expects the common equity tier-1 ratio to settle just below 15% in 2024-25, down from 16.1% in April–December, due to dividend payouts. The ratio could rise again in 2025-26 if the bank raises equity to bring down the government's stake to 75% in line with regulatory norms, the agency said.