The bank's weak earnings profile — as seen by its large stock of non-performing loans (NPLs) and the associated credit costs — will limit its ability to absorb the impact of the fraudulent transactions over the next 12-18 months, Moody's said in its press release on Monday. "Furthermore, provisions relating to the fraudulent exposures will largely offset the benefit the bank will receive from the Indian government's (Baa2 stable) capital infusion plan," it added. NEW DELHI: Global rating agency Moody's Investors Service on Monday downgraded the local and foreign currency deposit rating of Punjab National Bank ( PNB ) to junk.With this, the rating has been slashed to Ba1/NP from Baa3/P-3. Later, the amount of fraud was revised to Rs 14,000 crore.PNB was allegedly defrauded by the diamond trader Nirav Modi and his associates by fraudulent use of letters of undertakings (LoUs) and foreign letters of credit (LoC) in connivance with certain bank officials.The fraudulent transactions represented 320 basis points of the bank's risk-weighted assets as of March 2018, Moody's said. In 2017-18, after providing for 50 per cent of the fraudulent exposure, the bank reported a common equity tier 1 (CET1) ratio of 5.95 per cent against 8.05 per cent in October-December 2017.

Source: Economic Times May 21, 2018 08:03 UTC