Global rating agency Fitch on Tuesday assigned a stable outlook to public sector lenders State Bank of India (SBI) and Bank of Baroda (BoB) while affirming their 'BBB-' rating.
The probability of extraordinary state support is the highest for SBI among Indian banks due to its high systemic importance as the largest Indian bank, the state's 56.9 per cent controlling ownership, and its broader policy role than peers, Fitch said in a statement.
It also said impaired-loan ratio of SBI would continue to improve in FY23 supported by lower fresh impaired loans and ongoing recoveries.
SBI is the largest lender with about 20 per cent market share in terms of loans and deposits.
SBI's common equity Tier 1 (CET1) ratio is being tightly managed, leaving only a modest buffer above the required minimum of 8.6 per cent, given the higher growth likely in 2023 and 2024, it said.
It was around 10 per cent at 1QFY23 after factoring in profits, the same level as FY22, it added.
In another statement, Fitch kept its rating unchanged for Bank of Baroda.
The ratings on these banks are the same as India's sovereign rating (BBB-/Stable).
The BoB's rating is driven by expectation of a high likelihood of sovereign support to the bank in times of need due to its high systemic importance, it said.
It stems from BoB's large market position as India's third-largest state bank with over 6 per cent market share in sector assets and deposits, and 64 per cent state ownership, it said.