Foreign lenders review counter-party limits on Punjab National Bank

This, after rating agencies are reportedly placing PNB's rating under watch for a possible downgrade

Foreign banks have begun to review bilateral sanction limits with Punjab National Bank (PNB), after rating agencies Moody's and Fitch placed their earlier assessment of the government-owned lender’s under watch for a possible downgrade.

This had followed the Rs 114-billion fraud revelation at PNB, involving some of its own employees fraudulently issuing Letters of Understanding (LoUs), a trade finance instrument, for entities controlled by jeweller Nirav Modi.

An LoU is a type of guarantee a bank gives a customer, to allow the latter to raise money from another Indian bank's foreign branch, in the form of short-term credit.

PNB held