Fitch says the rating watch will be resolved after more clarity emerges on the extent of control failures and the impact on PNB’s financial position. Photo: PTI
Mumbai: Fitch Ratings on Tuesday placed Punjab National Bank’s (PNB) viability rating on a watch with negative implications, a move that reflects possible downgrade. Currently, viability ratings stands at “BB”.
“The RWN (rating watch negative) reflects the possibility of a downgrade of PNB’s Viability Rating following the detection of a large fraud in one of the bank’s branches amounting to $1.8 billion. While the exact financial impact from this event is still being ascertained, it has raised questions on both internal and external risk controls as well as the quality of management supervision considering that the fraud went undetected for several years,” Fitch said in a note.
It said that the rating watch will be resolved after more clarity emerges on the extent of control failures and the impact on PNB’s financial position.
Fitch also noted that it views this event to have a bearing on the bank’s support rating floor of BBB- given its systematic importance of being the second largest public sector bank.
“We believe that the state’s propensity to provide extraordinary support to PNB remains high, subject to the sovereign’s ability, which is captured in India’s sovereign rating of ‘BBB-’,” it said.
