India Ratings downgrades Punjab National Bank's Rs 67.5-bn AT1 bonds

India Ratings and Research (Ind-Ra) has downgraded Punjab National Bank's additional tier I (AT1) perpetual bonds worth Rs 67.5 billion by one notch to A/negative outlook from A+/negative.

However, the rating agency has affirmed the bank's overall long-term issuer rating at AA+ and the short-term issuer rating at A1+.

The outlook reflects the negative return of asset (ROA) for two consecutive years, weak capitalisation with common equity tier (CET) I of 6.21 per cent in the fourth quarter of last fiscal, Ind-Ra said in a release.

"The fraud of Rs 143.6 billion at PNB's Brady House Branch and delays in resolution of certain assets under the National Company Law Tribunal (NCLT) process have led to elevated requirements of provisions, and a significant impact on the overall operations of the bank," it said.

The rating of the AT1 bond signifies the weakness in the standalone operations of the bank, the release said.

PNB CEO Sunil Mehta had said that the lender would raise Rs 5,000 crore through rights issue or the QIP route.

The bank is also expecting a write-back of Rs 4,000 crore from Essar Steel, and Bhushan Power and Steel.