S&P Affirms SBI’s Rating At BBB-, Outlook Remains Positive

The positive outlook reflects the fact that SBI’s ratings are closely linked to India’s sovereign credit rating, the report said. State-run banks’ ratings are constrained by the sovereign credit rating and any changes in India’s sovereign rating will have a direct impact on SBI’s ratings.

S&P expects SBI to maintain its position as India’s largest bank with strong liquidity, supported by customer confidence and a solid deposit base. The bank’s asset quality is expected to remain better than the industry average over the next two years, with non-performing and restructured loans remaining at 2.5-3% compared to 3.0% in March, the report said.

However, SBI’s capitalisation continues to lag behind its private sector peers and its risk-adjusted capital ratio is projected to remain in the range of 5.5-6 per cent.

“We believe that it is highly likely that the Indian government would provide timely and sufficient extraordinary support to SBI if it were to experience financial distress,” S&P said.

The government held about 57% of SBI as of June 30 and is legally required to hold at least 51%.