Shares of Punjab National Bank (PNB) fell 3 percent intraday on Wednesday after rating agency Crisil put bank's bonds on “rating watch with developing implications”. The stock touched a low of Rs 62.70 as compared to the previous close of Rs 64.70 on the BSE.

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In a regulatory filing, the bank said the rating action has been done on account of the announcements made by the government with respect to the proposed amalgamation of public sector banks as there has been significant progress on the amalgamation including approvals from the boards of the banks.

“Crisil will resolve the rating watch once clarity emerges, post-merger completion, on the merged entity's business and financial profile. Crisil will monitor for potential integration challenges and any impact on the earnings profile of the merged entity,” PNB said.

The asset quality of the merged entity will also be monitored. However, on the resolution of the rating watch, the rating on the debt instruments of the merged entity is unlikely to move by more than one notch, the bank added.

Earlier in August, the finance ministry had announced the merger of four major public sector banks, bringing down their numbers to 12 from 27 in 2017.

Accordingly, United Bank of India and Oriental Bank of Commerce will be merged with Punjab National Bank to become the second-largest public sector bank.

At 1:35 pm, shares of PNB declined 2.70 percent to Rs 62.95 on the BSE.