PNB’s viability rating hit

Fitch places the bank on watch after the fraud comes to light

GN Bureau | February 20, 2018


#PNB Fraud   #Economy   #Banking   #Punjab National Bank   #PNB Scam   #Nirav Modi  


The large-scale fraud perpetrated on Punjab National Bank has hit its rating. Fitch Ratings has placed its Viability Rating of 'bb' on Rating Watch Negative (RWN). The rating firm said it will resolve the Rating Watch “once more clarity emerges on the extent of control failures and the impact on PNB's financial position”.

“At this stage, Fitch does not view this event to have an impact on PNB's Support Rating Floor (BBB-) due to the bank's high systemic importance as the second-largest state-owned 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 in a release.

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 $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.

PNB's asset quality and capital parameters continue to be weak but have shown some stability since Fitch's rating action in June 2017. For the nine months of financial year to December 2018 PNB's non-performing loan (NPL) ratio eased to 12.1% (12.5% FYE17) while its CET1 ratio improved to 8.05% (7.9%). Profitability continued to be weak but the bank raised Rs 50 billion ($770 million) in fresh equity from the capital markets in 3QFY18. PNB is also likely to get an additional Rs 54 billion ($850 million) from the government by end-March 2018 under the government's recapitalisation agenda.


 

Comments

 

Other News

India faces critical shortage of skin donors amid rising burn cases

India reports nearly 70 lakh burn injury cases every year, resulting in approximately 1.4 lakh deaths annually. Experts estimate that up to 50% of these lives could be saved with adequate access to skin donations.   A significant concern is that around 70% of burn victims fall wi

Not just politics, let`s discuss policies too

Why public policy matters Most days, India`s loudest debates stop at the ballot box. We can name every major leader and recall every campaign slogan. Still, far fewer of us can explain why a widow`s pension is delayed or how a government school`s budget is actually approved. That

When algorithms decide and children die

The images have not left me, of dead and wounded children being carried in the arms of the medics and relatives to the ambulances and hospitals. On February 28, at the start of Operation Epic Fury, cruise missiles struck the Shajareh Tayyebeh school – officially named a girls’ school, in Minab,

The economics of representation: Why women in power matter

India’s democracy has grown in scale, but not quite in balance. Women today are active participants in elections, influencing outcomes in ways that were not as visible earlier. Yet their presence in legislative institutions continues to lag behind. The Nari Shakti Vandan Adhiniyam was meant to addres

India will be powerful, not aggressive: Bhaiyyaji

India is poised to emerge as a global power but will remain rooted in its civilisational ethos of non-aggression and harmony, former RSS General Secretary Suresh `Bhaiyyaji` Joshi has said.   He was speaking at the launch of “Rashtrabhav,” a book by Ravindra Sathe

AI: Code, Control, Conquer

India today stands at a critical juncture in the area of artificial intelligence. While the country is among the fastest adopters of AI in the world, it remains heavily reliant on technologies developed elsewhere. This paradox, experts warn, cannot persist if India seeks technological sovereignty.


Archives

Current Issue

Opinion

Facebook Twitter Google Plus Linkedin Subscribe Newsletter

Twitter