Mumbai:Global rating agency Fitch on Wednesday downgraded the viability ratings (VRs) of State Bank of India (SBI) and Bank of Baroda (BoB), but affirmed their ‘BBB’ long-term issuer default ratings, along with that of Canara Bank and Bank of India (BoI).

The agency has also retained the stable outlook on these lenders. Fitch has downgraded the VRs of SBI and BoB by one-notch to ‘BB+’ and ‘BB’, respectively, citing “their weakened intrinsic risk profile due to the negative effect of persistently poor asset quality and earnings on their capital position”.

The agency, which has a negative sector outlook on the domestic banks, however, said the new NPA framework has accelerated bad-loan recognition, and should improve the health over the long term.

“However, heavy losses and capital erosion reinforces our belief that sector core capitalisation will remain weak unless authorities provide more capital than the budgeted USD 11 billion,” it added.