Moody's placed Yes Bank's rating under review for downgrade on Tuesday, citing the private-sector lender's exposure to some weak financial companies.

"The review for downgrade takes into account Moody's expectation that the ongoing liquidity pressure on finance companies will negatively impact the credit profile of Yes Bank, given the bank's sizeable exposure to weaker companies in the sector," the rating agency said in a note.

Shares of Yes Bank, which rose as much as 5.6 per cent intraday, pared some gains to settle 2.7 per cent higher on the NSE Nifty that was up 0.36 per cent.

Last week, Dewan Housing Finance Corp delaying payments on some of its bonds fanned fears of a crisis in the shadow banking sector.

The sector has been reeling under a liquidity crunch triggered by a series of defaults at major lender Infrastructure Leasing and Financial Services last year.

At March-end, Mumbai-based Yes Bank's exposure to housing finance companies (HFC) and non-bank finance companies (NBFC) was 6.4 per cent of its total exposure, Moody's said, adding that the bank had a 7 per cent direct exposure to the commercial and residential real estate sector, which is also under pressure.

The rating agency said it was reviewing the rating on several of the bank's debt instruments, including its foreign currency issuer rating of 'Ba1'.

Moody's expects "significant" pressure on the bank's asset quality, and therefore, profitability and capital position. It, however, expects the impact to be cushioned by the bank's proactive loan loss provisioning.

The lender posted a surprise loss for the fourth quarter in April, hurt by a surge in provisions. That prompted brokerage Macquarie Research to set a rare double-downgrade on the company's stock and triggered a massive sell-off in the stock.