In a major development on Monday, the global credit rating agency Moody's Investor Service has downgraded PNB rating to Ba1 from Baa3 while maintaining the rating outlook as 'stable'. "Moody's Investors Service has downgraded the local and foreign currency deposit rating of Punjab National Bank (PNB) to Ba1\/NP from Baa3\/P-3," Moody's said in a statement. The baseline credit assessment (BCA) and adjusted BCA has been downgraded to b1 from ba3. PNB shares were little changed even after the news and continued to trading up about 2% at Rs\u00a076.25 after opening at Rs 76 on NSE on Monday. Up until 1:20 pm, about 1.4 crore equity shares exchanged hands on NSE. The recent changes have come after Moody's reviewed PNB's rating following the discovery of a multi-billion fraud at India's second-largest PSU bank PNB in mid-February, involving the jeweller duo Nirav Modi and Mehul Choksi.\u00a0Moody's Investor Service has also downgraded PNB's foreign currency issuer rating to Ba1 from Baa3. and the Counterparty Risk Assessment (CRA) of the bank to Ba1(cr)\/NP(cr) from Baa3(cr)\/P-3(cr). The downgrade of the bank's BCA and ratings reflects the negative impact of the discovery of a number of fraudulent transactions on the bank's standalone profile, particularly its capital position. The rating downgrade also reflects the weak internal controls and processes of the bank, given that the fraudulent transactions were undetected for a number of years, Moody's said. "The bank's weak earnings profile \u2014 as seen by its large stock of nonperforming loans (NPLs) and the associated credit costs \u2014 will limit its ability to absorb the impact of the fraudulent transactions over the next 12-18 months. 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," Moody's said further. According to Moody's Investor Service, the fraud transactions represent\u00a0320 basis points of the bank's risk-weighted assets as of March 2018 and PNB\u00a0will require external capital of about Rs 120-130 billion in fiscal 2019 to meet the minimum Basel III CET1 ratio of 8% by March 2019, including a capital conservation buffer. This estimate takes into account the aging basis provisions for the NPLs, the deferred provisions for the fraud, investment losses and employee benefit expenses as well as a reduction in risk-weighted assets. Also Read | Biggest ever loss in PNB Q4 results! How stressed is India\u2019s 2nd largest PSU bank: 5 key points "Moody's expects that the government will provide extraordinary support to the bank's creditors and depositors when required," Moody's Investor Service said further. Moody's Investor Service said that PNB's BCA could be upgraded if the capital infusion received from the Indian government, and or any actions taken by the management, improve the PNB's capitalisation to a level which is in line with other similarly-rated Indian public sector banks. While, on the other hand, a further downgrade may be seen in PNB's BCA and ratings if Punjab National Bank's capitalisation worsens beyond Moody's expectations. Earlier last week, PNB reported a loss of Rs 13,416.91 crore for the quarter ended 31 March 2018 which is the biggest loss by an Indian Bank ever in history, mainly on the back of Rs 14,400 crore (approx) fraud allegedly involving diamantaire Nirav Modi and his uncle Mehul Choksi.