Sept. 9 (Bloomberg) -- State Bank of India and other government-controlled lenders in the South Asian nation were downgraded to ``sell'' from ``neutral'' by Goldman Sachs Group Inc. today.

India's financial sector was cut to ``cautious'' from ``neutral'' on slowing loan growth, rising bad debt and increased provisions by Goldman Sachs analyst Sampath Kumar. Punjab National Bank, Bank of Baroda and Indian Overseas Bank were the other lenders whose ratings were also reduced.

``We see headwinds to market expectations of earnings growth over the medium term,'' Kumar said in a note to clients today. ``Rising credit costs tend to have an outsized impact on banks' earnings.''

To contact the reporters on this story: M.C. Govardhana Rangan in Mumbai at grangan@bloomberg.net.

Last Updated: September 8, 2008 23:12 EDT