Covid-19 impact: Moody's lowers SBI's baseline credit assessment to 'ba2'

The rating agency, however, affirmed SBI's Baa3 deposit ratings

Rating agency Moody’s has downgraded State Bank of India’s (SBI’s) baseline credit assessment (BCA) from “ba1” to “ba2” as economic shock from the Covid-19 pandemic may aggravate the weakening borrowers’ credit profiles. It would hurt asset quality of India banks. The agency affirmed SBI’s Baa3 deposit ratings.

The downgrading reflects that bank’s asset quality and profitability will deteriorate. The resultant weakening in internal capital generation will reverse improvements in its financial metrics achieved over the past two years.

SBI’s bad loan ratio was potentially understated as it does not capture loans on which the bank has granted payment deferrals. 

Also, its common equity