Credit rating agency Fitch Ratings on Monday downgraded the viability rating of Punjab National Bank to ‘b’ from ‘bb-’, and maintained it on “Rating Watch Negative”, PTI reported. Businessman Nirav Modi and his associates are accused of cheating the bank of more than Rs 13,000 crore.

“The two-notch downgrade to PNB’s VR is a reflection of the significant deterioration in its standalone credit profile, mainly due to a drop in its core capital ratio that was bigger than our expectation,” the agency said in a report. A sharp increase in its non-performing loans, including the fraudulent transactions reported in February, caused the bank’s core capitalisation to deteriorate. Last month, the bank reported a net loss of Rs 13,416 crore in the fourth quarter of the 2017-’18 financial year.

“The decline also highlights management’s weaker execution and previous underwriting and oversight gaps, which the bank has already started taking steps to address,” the rating agency said. The agency added that it would continue to focus on the bank’s ability to raise a significant portion of its capital needs, independent of the government, to address pressures on its asset quality and earnings performance, BloombergQuint reported. Fitch Ratings warned the bank that it would take action on its standalone creditworthiness if it fails to do so.

Last month, Moody’s had downgraded PNB’s rating from Baa3/P-3 to Ba1/NP due to the impact of the Nirav Modi fraud case on its profitability.