"Our stable outlook reflects our assessment that the developments in monetary policy, financial supervision and market reform will help stabilize banks' operating environment, their liquidity and capital," said Christine Kuo, a Moody's senior credit officer, adding that though their profitability and asset quality will still be under pressure over the next 12 to 18 months.

GDP data to be released

Sinopec and PetroChina, the country's two resources behemoth, slid more than 8 percent on Monday. China Railway Construction Corp and China Railway Engineering Corp sank 10 percent. The country is scheduled to release GDP growth data in the fourth quarter on Tuesday.

Nomura said in a note on Monday that it maintains the GDP growth forecast of 7.3 percent year-on-year in the fourth quarter 2014, before slowing to 7.1 percent in the first quarter this year, weighed down by tighter controls over local government financing, the property market correction and other structural issues.

The Shenzhen Component Index slumped 6.6 percent and closed at 10,770.93.