Bank of Baroda makes a corporate announcement

Q1 FY27’s NIM compression was not caused by a rise in deposit costs. On management’s reported global basis, NIM was 2.77%, versus above 2.80% in the previous quarter—a modest decline of at least 3 bps, although the bank did not publish an exact bps bridge. Domestic NIM remained higher at 2.93%. ^[1]

The conclusion is therefore directional rather than a precise percentage allocation:

• Rising deposit cost: no sequential drag in Q1; deposit cost actually declined by 12 bps.
• Loan repricing: supportive, as the bank repriced selected assets upward, but the benefit was not quantified.
• Residual compression: primarily attributable to rapid asset growth and the lower-margin international mix, with management explicitly linking 16–17% growth to NIM pressure.

As corroboration, interest income grew 6.8% YoY versus 5.2% growth in interest expense, indicating that the funding-cost trend was not deteriorating on a year-on-year basis. ^[5]

Basis caveat: the structured KPI series reports consolidated NIM at 2.6% in Q1 FY27 versus 2.5% in Q4 FY26 ^[6], which differs from the company’s 2.77% global NIM reported in the results release. The compression analysis above uses management’s global NIM series, since that is the metric discussed alongside domestic NIM and cost of deposits.

Bank of Baroda’s latest investor presentation is for Q1 FY27, ended 30 June 2026. The current slippage ratio was 0.91% and credit cost was 0.29%. Management’s maintained guidance is 1.00–1.25% for slippages and credit cost below 0.60%. ^{[7] [8]}

Reconciliation with MSME and retail asset quality

• MSME: Fresh slippages increased marginally to Rs 1,298 Crores in Q1 FY27, from Rs 1,241 Crores in Q4 FY26 and Rs 1,228 Crores in Q1 FY26. MSME NPAs were Rs 9,903 Crores, versus Rs 9,713 Crores in Q4 FY26 but below Rs 10,619 Crores in Q1 FY26. ^{[9] [10]} The MSME book itself grew 20.3% YoY to Rs 1,63,264 Crores. ^[11] This means the absolute MSME NPA stock remains a monitorable, but the year-on-year trend is improving; management also said ECLGS had helped protect the MSME portfolio and that it was not seeing incremental stress above the previous quarter. ^[12]
• Retail: Retail fresh slippages declined to Rs 870 Crores, from Rs 995 Crores a year earlier, although they rose from Rs 686 Crores in Q4 FY26. Retail NPAs increased sequentially to Rs 5,877 Crores from Rs 5,447 Crores, but the retail book grew 18.4% YoY to Rs 3,09,674 Crores. ^{[9] [10] [11]} The presentation also reported GNPA ratios of 1.13% for housing, 1.67% for auto, 4.95% for personal loans and 0.56% for retail gold loans. ^[9]

Analyst read: The overall slippage and credit-cost outcomes are better than management’s bank-wide thresholds, but they do not imply that every segment is equally benign. Retail is broadly consistent with the aggregate asset-quality objective, helped by lower YoY fresh slippages, while MSME remains the more important risk monitor because its NPA stock and fresh slippages are higher in absolute terms. The cited presentation does not set separate numeric slippage or credit-cost targets for MSME and retail; the reconciliation is therefore against the bank-wide targets, supported by segment-level movement rather than a formal segment target-versus-actual scorecard.

Bank of Baroda has one of the highest CD ratios among the selected public-sector banks. Its latest global CD ratio is approximately 86.36% as of 30 September 2026, derived from global advances of Rs 15,12,435 Crores and global deposits of Rs 17,51,262 Crores ^[13]. This is materially above PNB and Canara, and broadly comparable with Union Bank and Bank of Maharashtra, although the reporting bases and dates are not fully uniform.

Notes: †Derived as advances / deposits. The latest comparison is directional because Union Bank reports a domestic ratio excluding bank deposits, while Bank of Maharashtra’s latest available figure is from Q1 FY27. On the cleanest common Q1 FY27 consolidated comparison, Bank of Baroda’s CD ratio was 86.0%, versus PNB at 71.8%, Union Bank at 80.7%, Canara Bank at 77.8%, Indian Bank at 79.1%, and Bank of Maharashtra at 82.2% ^{[19] [20] [21] [22] [23] [24]}.

CASA strategy and implications

Management’s disclosed approach is not to maximise the CD ratio further, but to strengthen granular deposits and contain the cost of funding:

• Reduce dependence on bulk deposits: Management said the bank had a higher bulk-deposit share three to four years earlier and has materially reduced it over time. It linked this change to stronger CASA, savings-account and overall deposit growth relative to the system ^[25].
• Build CASA through savings and current accounts: Domestic CASA deposits grew 10% YoY in Q1 FY27, while current-account deposits grew 14.5% YoY; the domestic CASA ratio was 37.72% ^{[4] [5]}. The current-account growth is important because it indicates that the improvement is not dependent only on savings balances.
• Control wholesale funding concentration: Management acknowledged that depositor preference has shifted toward capital-market products and that some money is returning to banks through wholesale deposits rather than retail deposits. Its stated control variable is the combined share of bulk and certificate-of-deposit funding in total deposits ^[25].
• Use a CD-ratio guardrail while growing credit: Bank of Baroda retained guidance for 12–14% credit growth, 10–12% deposit growth, and a CD ratio in the 84–86% range ^[26]. This indicates that management views deposit mobilisation and CASA improvement as the funding foundation for continued lending, rather than relying indefinitely on a rising CD ratio.
• Diversify funding where appropriate: FCNR(B) funding was discussed as an additional balance-sheet cushion, but management’s commentary prioritised the deposit franchise and reduction of bulk-deposit dependence; it did not quantify a separate CASA uplift attributable to FCNR(B) ^[25].

Analytical read: Bank of Baroda currently has ample loan deployment relative to deposits, but its CD ratio leaves less funding slack than PNB, Canara and Indian Bank. The sustainability question therefore shifts to the quality and cost of incremental deposits. Management has articulated the right broad levers—more savings and current-account balances, lower bulk-deposit dependence and disciplined CD-ratio management—but the recent disclosures do not specify a new numeric CASA target or a detailed branch-level acquisition plan.