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SBI, Other PSU Banks Fall On Rating Agency Downgrades

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State Bank of India, the country's largest lender, fell as much as 3.66 per cent after ratings agency Moody's downgraded its outlook on the bank's financial strength rating to 'negative' from 'stable'.

Moody's also downgraded SBI's unsecured debt rating on par with the sovereign foreign currency bond rating.

Ratings agency Fitch downgraded some ratings for state-owned Indian Bank, Punjab National Bank and Bank of Baroda on expectations of a further deterioration in asset quality and a sharp deceleration on economic growth.

State-owned banks have seen a rise in stressed assets. Bad loans at the 10 largest banks rose 36 per cent in FY13. In comparison, non-performing loans at India's three largest private sector banks rose by 8 per cent in the period.

SBI's standalone credit profile continues to face negative pressures, and it will have to compete with other public sector lenders for capital injection from the government, Moody's said.

SBI's impaired loan ratio of 8.6 per cent at end-June is below the 11.5 per cent average for Indian public sector banks rated by Moody's.

At 11.35 am, shares of SBI were down 1.18 per cent at Rs 1632.35 each. Indian Bank was down 2.59 per cent, Bank of Baroda and Punjab National Bank were marginally down.