Strong competitive position in the domestic banking industry; Strong earnings due to high interest margins; and Robust asset quality and strong capitalization. Weaker operating environment. The counterparty credit rating on HDFC Bank Ltd. takes into account the bank's strong earnings, led by low funding costs and a solid franchise, robust asset quality, and strong capitalization. The rating is constrained by the operating environment in India, where the bank has its predominant operations. Standard&Poor's Ratings Services tends not to rate banks above the sovereign rating on India (BBB-/Negative/A-3) because of the direct and indirect influence that a sovereign in distress would have on a bank's operations, including its ability to service foreign-currency obligations. HDFC Bank is a midsize bank
