PNB scam: Bank assures it has strong sovereign backing, adequate capital

Scam-hit PNB has assured investors and customers that it has a strong sovereign backing and adequate capital to deal with the situation in the aftermath of the Rs 114 billion fraud.

"We assure you that in your bank, it is business as usual," state-owned Punjab National Bank said in a tweet.

The country's second largest lender has also dismissed media reports that it has imposed restrictions on withdrawals.

"Be rest assured we have a strong sovereign backing. The core strengths of the bank is the brand image with rich 123 years of existence, strong CASA base, stable asset quality and increased pace of digitisation," PNB said.

Earlier this month, the bank said that it has been hit by a fraud amounting to about $1.77 billion. The alleged fraud was affected by fraudulent Letter of Undertakings (LOUs) issued to firms of diamantaire Nirav Modi and Mehul Choksi.

"We have adequate capital coupled with strong non core asset base," said the PNB tweet as multi-agency probe widened into the fraud.

PNB also said that it has the capacity and capability to "handle the situation" and protect the interest of the institution.

"Some news like restrictions on withdrawals etc is floating in some channels. It has been created by some miscreants and is totally baseless," the PNB added.

Bank's scrips closed almost flat on benchmark

International rating agencies Moody's Investor Service and Fitch Ratings yesterday warned PNB of rating downgrades, citing likely networth erosion and widening losses at the bank.

Moody's said the review for downgrade will focus on: (1) the timing and quantum of the financial impact of the fraudulent transactions, (2) any management actions taken to improve the capitalisation profile of the bank, and (3) any punitive actions taken by the regulator on the bank.