Moody's Investors Service on Tuesday placed Punjab National Bank's (PNB) rating under review for downgrade after the lender reported a ₹11,500 crore fraud.
"The primary driver for today's rating action is the risk of weakening of the bank's standalone credit profile, as a result of the discovery of a number of fraudulent transactions," Moody's said. It expects that PNB will need to provide for at least a substantial portion of the exposure.
"As a result, the bank's profitability will likely come under pressure, although the actual impact will depend on the timing and quantum of provisions that need to be made, as well as any prospects for recovery," it said.
Separately, Fitch Ratings placed PNB on a Viability Rating of 'BB' on Rating Watch Negative (RWN). "The RWN 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 USD 1.8 billion," it said.
"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," it added.
