Global credit rating agency Fitch Ratings on Tuesday put the Punjab National Bank on “Rating Watch Negative” after it reported a Rs 11,380 crore scam last week, PTI reported. This increases the possibility of the agency downgrading the state-run lender’s rating.

“Fitch Ratings has placed Punjab National Bank’s Viability Rating of ‘bb’ on Rating Watch Negative after it reported a large fraud,” the United States-based agency said. Fitch added that the fraud raised questions on both internal and external risk controls and the quality of management supervision, given that it went undetected for several years.

The Viability Rating measures the creditworthiness of a firm and the likelihood that the company would fail, Fitch said, according to PTI. The agency said it would monitor the Punjab National Bank’s full liability, potential recoveries and the extent of additional fresh capital from both internal and external sources to determine whether to downgrade the lender.

Credit rating agency Moody’s also placed the bank under review for a ratings downgrade citing fraudulent transaction. Currently, the bank has a foreign currency deposit rating of Baa3/P-3 with Moody’s. It has a Baa3 rating as a foreign currency issuer and an overall rating of Baa2. A rating of Baa2 is lesser credit risk than Baa3.

On Monday, the Indian government had refuted a news report that the Income Tax Department had estimated a Rs 19,317-crore “hit” for Indian banks because of the alleged fraud.

The case

Jewellery designers Nirav Modi and Mehul Choksi are among those booked for fraud and accused of cheating Punjab National Bank in a Rs 11,380-crore scam.

The scam involved bank officials allegedly handing out fake Letters of Understanding on behalf of companies associated with Modi, which allowed him to access massive foreign exchange loans that were completely unsecured.