Fitch downgrades PNB’s viability rating to ‘BB-’ following Nirav Modi fraud
New Delhi :Following the more than Rs 13,000 crore fraud involving billionnaire jeweller Nirav Modi, Fitch Ratings has downgraded the Viability Rating of Punjab National Bank (PNB) to ‘bb-’ from ‘bb’,and has maintained the bank under Rating Watch Negative (RWN).
Fitch’s Viability Ratings represent the agency’s view on the creditworthiness of a lender.
According to a statement from the credit ratings agency, PNB’s Support Rating of ‘2’ and Support Rating Floor of ‘BBB-’ remain unchanged due to our view of the bank’s high systemic importance as India’s second-largest state-owned bank, which underpins the state’s high propensity to provide extraordinary support to PNB.
“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 statement said.
Soon after the fraud was revealed in February 2018, Fitch had warned PNB of downgrading its Viability Ratings.