Global rating agency Fitch today affirmed 'BBB-' or investment grade with stable outlook to the country's largest lender State Bank of India (SBI).
The agency has also affirmed SBI's Viability Rating (VR) at 'bbb-'.
The ratings of SBI are driven by a high probability of support from the government, given its systemic importance as the largest bank in India, as the sole banker in many economically backward regions and as a banker to various government entities, Fitch said in a statement.
As a result the long-term ratings are linked to the sovereign rating and will move in tandem with the latter, it said.
However, it said, some of SBI's credit fundamentals are under pressure.
Notwithstanding the revenue strengths, internal capital generation has remained and is likely to remain under pressure, firstly due to increasing credit costs and secondly on account of pension costs, at the time of the next wage revision, it said.
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The weakening operating environment means Fitch expects credit costs to increase and the level of non-performing loans to rise, it said.
These pressures have occurred at a time when capitalisation is also low relative to the bank's peer group and capital levels internationally are rising, it said.
The operational and data integrity risks associated with a large organisation have also been highlighted by the size and timely recognition of pension liabilities, it said.
SBI is the largest bank with over 13,500 branches in FY11, accounting for around 17% of both system assets and deposits. SBI's asset share is over three times that of the second-largest bank in India, it said.