Stock markets in India are presently trading marginally higher. Sectoral indices are trading on a mixed note with stocks in the IT sector and consumer durables sector witnessing maximum buying interest. Realty stocks are trading in the red.

The BSE Sensex is trading up 73 points (up 0.2%) and the NSE Nifty is trading up 17 points (up 0.2%). The BSE Mid Cap index is trading flat, while the BSE Small Cap index is trading down by 0.1%. The rupee is trading at 64.52 to the US dollar.

In the news from the banking sector, Fitch has placed Punjab National Bank (PNB) on ‘Rating Watch Negative’ (RWN), reflecting a possibility of downgrade following the US$1.77 billion fraud.

Fitch said that the fraud has raised questions on both internal and external risk controls as well as the quality of management supervision considering that the fraud went undetected for several years.

The PNB fraud case involves bank employees issuing unauthorized LoUs to three companies and four people, including Nirav Modi and Mehul Choksi.

The fraud is essential that Nirav Modi did not pay the security deposit needed to raise an LoU. These LOUs were used to obtain short-term credit from overseas branches of other Indian banks.

The detailed investigation found that Nirav Modi had not been putting in enough of security deposit since 2011; the value of LoUs without these deposits is now around Rs 114 billion.

The above scam has put the public-sector banks (PSB’s) in the limelight for all the wrong reasons. PNB is defrauded to the tune of US $ 1.77 billion. That’s the last thing these banks needed after the crisis they’ve had in the past few years.

While their bad loans struggle has been going on for a decade, there are other issues that have recently cropped up adding to their pile of misery. Bureaucracy and a lack of autonomy have ensured the sub-optimal profitability and asset quality of these state-run banks.