India Ratings & Research (Ind-Ra) has affirmed Bank of Baroda's (BOB) long-term issuer rating at 'AAA' with a stable outlook and short-term issuer rating at 'A1+'.

BOB's ratings reflect Ind-Ra's expectation of continued strong support from its principal shareholder-the government of India (GoI, 55.4% shareholding as at end-September 2013 (1HFY14)).

This reflects BOB's systemic importance as the second-largest bank in terms of total deposits and third-largest bank in terms of total assets, and its large pan-India franchise (4,483 branches). GoI injected Rs 5.5 billion of common equity into BOB in January 2014.

The ratings also factor in BOB's competitive financials and funding with respect to similar rated peers. The bank is adequately capitalised (Basel III Tier 1 ratio as at 1HFY14: 9.25%, excluding half yearly profit) to sustain its loan growth, which is targeted at around 1% in excess of system average for the next three years. However, asset quality pressures are visible over the near-to-medium term which may impact the bank's profitability.