Rating agency Crisil has placed Punjab National Bank’s (PNB) ratings on the debt instruments of Rs 22,223 crore on ‘Rating Watch with Developing Implications’. The agency said it will remove the ratings from watch and take a final rating action once it has clarity from the bank management on recovery prospects, along with a possible timeline. Crisil said it has sought clarity from PNB to understand the timeline and quantum of crystallisation of this contingent liability, prospects for recovery, estimated provisioning, potential impact on capitalisation ratios and expectation of additional capital support, among others. “The rating action follows the disclosure by the bank on February 14 that it has detected some fraudulent and unauthorised transactions in one of its Mumbai branches. The quantum of such transactions is approximately Rs 11,300 crore,” Crisil said.
“Also, profitability is modest with the bank reporting an annualised return on assets of 0.20% for the nine months ended December 31, 2017,” Crisil said.
It added that aside from the impact of this fraudulent transaction, the proposed capital infusion of Rs 5,473 crore in the current fiscal under the PSB recapitalisation plan is expected to help absorb increase in provisioning burden and meet regulatory requirements.
Interestingly, on January 25, Crisil had revised its outlook on the Infrastructure bonds, Tier II Bonds (Under Basel III), Lower Tier-II bonds (under Basel II), Tier-I Perpetual Bonds (under Basel II) and Upper Tier II Bonds (under Basel II) of PNB to stable from negative, while reaffirming the ratings at Crisil AAA. “The revision in outlook was primarily driven by government’s recapitalisation plans for public sector banks, including PNB, in the current fiscal and CRISIL’s expectation that it would help in meeting Basel III regulatory capital norms, and provide a cushion against expected rise in provisioning for non-performing assets (NPAs),” it said.