New Delhi: Days after the Punjab National Bank (PNB) fraud amounting to Rs 11,360 crore came to light, rating agency Moody's has placed the bank under review for downgrade, while Fitch has warned of a possible downgrade by placing PNB’s viability rating of ‘BB’ on Rating Watch Negative (RWN).
According to Fitch, ‘BB’ is essentially a credit score. “BB ratings indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial flexibility exists that supports the servicing of financial commitments,” defines the agency.
The fall in rating comes after diamond merchant Nirav Modi and Gitanjali Gems’ chief Mehul Choksi were involved in fraudulent transactions worth more than Rs 11,000 crore through Punjab National Bank.
“A Rating Watch is typically event-driven, and as such, it is generally resolved over a relatively short period. The event driving the Watch may be either anticipated or have already occurred, but in both cases, the exact rating implications remain undetermined,” says Fitch.
The rating agency on January 25 had expressed easing of downgrade after the Ministry of Finance recapitalised banks with $14 billion.
“The large recapitalisation is credit positive and will stem downward pressure on viability ratings, which have been cut several times over the last three to four years,” Jobin Jacob, a Mumbai-based associate director at Fitch, told Bloomberg.
The prime portion of the money — Rs 10,600 crore — went to IDBI Bank, whose bad-loan ratio was 25%, more than double of the overall industry.
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