A Busbar (BB) is one of the most important elements of a power system, which links a variety of elements such as generators, power transformers, transmission lines and loads. The BB fault current magnitude is very large, which has to be immediately cleared in order to minimize the failure in the power system, and to avoid the CT saturation effects. This paper presents a novel BB protection scheme based on closed‐tripping characteristics of coherence coefficients computed for BB current signals. Three‐phase current signals of each circuit connected to the protected busbar are measured for calculating nine cross‐coherence coefficients. These coefficients are compared with each other and with a pre‐determined threshold value to identify the fault location, classification and direction discrimination, as well as to differentiate the internal and external faults with CT saturation extent. The scheme is tested under different types of external and internal faults with variations of faulty phase(s), fault locations, fault resistances, fault inception angles, and power flow angles. ATP platform is used for power system simulation, and MATLAB software is applied to validate the proposed protection algorithm. The simulation results prove that the scheme is fast, where its operating time is within a sub‐cycle time range, and it has the ability to discriminate between internal and external faults with/without CT saturation condition. Moreover, the numerical technique is immune to CT saturation effect, and it is simple, effective, secure, reliable, stable and feasible.