SBI, HDFC Bank Retain Strong Moody’s Ratings On Healthy Asset Quality

Moody’s Ratings has affirmed the ratings of State Bank of India (SBI) and HDFC Bank, maintaining a stable outlook for both lenders, citing their strong asset quality, profitability, funding strength, and liquidity positions. The ratings agency said the financial performance and credit profiles of the two largest Indian banks remain supported by diversified lending portfolios and resilient domestic demand.

In separate statements issued on Tuesday, Moody’s affirmed the long-term deposit ratings of SBI and HDFC Bank at ‘Baa3’. The agency also confirmed their ‘baa3’ Baseline Credit Assessment (BCA) and adjusted BCA, reflecting the banks’ stable financial fundamentals and ability to manage credit growth while maintaining strong balance sheets.

For SBI, Moody’s said the rating affirmation reflects the bank’s large and diversified lending portfolio, stable asset quality, and strong domestic franchise. The agency noted that SBI benefits from a wide customer base, access to low-cost deposits, and significant holdings of liquid government securities, which strengthen its funding and liquidity position. The bank’s profitability is also supported by stable net interest margins, diversified non-interest income, and relatively low credit costs.

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Moody’s expects SBI’s asset quality to remain broadly stable, supported by continued domestic economic activity and healthy credit growth. However, it cautioned that certain segments, including agriculture and Micro, Small and Medium Enterprise (MSME) lending, could see some moderation after rapid expansion in recent years. The agency also expects credit costs to rise slightly from historically low levels, while noting that the overall corporate sector remains healthy with low leverage and strong profitability.

For HDFC Bank, Moody’s said the affirmation reflects its consistent asset quality, strong profitability, and solid capital position. The rating agency highlighted the bank’s strong retail franchise, which provides access to a large base of low-cost deposits, along with its investments in liquid government securities that support funding and liquidity management.

Moody’s added that HDFC Bank’s capital strength is supported by internal capital generation and access to equity markets when required. The agency expects the private sector lender to maintain adequate capital buffers to support future credit expansion. The stable outlook for both SBI and HDFC Bank indicates that Moody’s expects their financial positions to remain steady over the medium term.

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