New Delhi : Fitch Ratings on Tuesday downgraded the Viability Rating of the Punjab National Bank (PNB) to ‘bb-‘ from ‘bb’ and maintained the rating on Rating Watch Negative (RWN) following a multi-crore fraud involving diamond trader Nirav Modi.
PNB’s other ratings were unaffected by this downgrade but it expressed doubts whether the bank management would be able to address the fraud quickly.
“The downgrade follows our assessment of how losses resulting from fraudulent transactions reported in February 2018 will affect the bank’s financials, including its earnings and core capitalisation. The downgrade also reflects the bank’s risk controls, which we think are weaker than what we had previously believed, since the fraud was undetected for several years and acquired a large scale of $2.2 billion. That said, the bank plans to strengthen its risk control,” the rating agency said. Fitch said the PNB’s Viability Rating reflected its weakened capitalisation and profitability due to “larger-than-Fitch-expected deficiencies in management oversight and risk controls.
We have enough capital: Mehta
Mumbai: Punjab National Bank said it has enough capital and ability to absorb the entire fraud burden. The bank said it will honour all bona-fide commitments to all stakeholders, its managing director Sunil Mehta said. He says the bank is seeking to rationalise all its operations – both overseas and domestic — to focus more on profitable ventures. In fact, it has decided to close three representative offices abroad and merge two branches. Mehta also said the bank hasn’t yet encountered any fraud in its scanning of all accounts above Rs 50 crore, in sync with a government directive to all state-run banks.