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

State Bank of India has received a 'BBB-/positive/A-3' issuer credit rating from S&P Global Ratings. Its standalone credit profile was maintained at 'bbb'. The outlook on SBI's rating remains positive, according to an exchange filing by the bank.

The positive outlook reflects that SBI's ratings are closely tied to the sovereign credit ratings of India, the report said. The ratings on the public sector bank are capped by the sovereign credit ratings, and any changes in India's sovereign rating will have a direct impact on SBI's rating.

S&P expects SBI to maintain its position as the largest bank in India with strong liquidity, driven by high customer confidence and a robust deposit franchise. Over the next two years, the bank's asset quality is expected to remain better than the sector average, with non-performing loans and restructured loans likely to stay at 2.5–3% of total loans, compared to 3.0% as of March, the report found.

However, SBI's capitalisation will continue to lag behind its private sector counterparts, with a risk-adjusted capital ratio projected to remain in the 5.5–6% range.

"We see a very high likelihood that the Indian government would provide timely and sufficient extraordinary support to SBI in the event the bank encounters financial distress," S&P said.

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

SBI's market dominance, product diversity, and abundant liquidity are key strengths, according to S&P. The bank benefits from its large presence in India, spanning across geographic and product lines, and from a strong deposit franchise that provides ample liquidity.

Despite its leadership position, SBI's capitalisation remains weaker than that of large private sector banks in India. The RAC ratio, which stood at 5.9% as of March, is expected to stay moderate over the next two years.