RBI removes three more banks from PCA framework
MUMBAI: The Reserve Bank of India (RBI) on Tuesday lifted lending curbs on two more public sector banks (PSBS), Allahabad Bank and Corporation Bank, by removing them from its weakbank watch list after the government infused capital in them.
Private sector Dhanlaxmi Bank too has been taken out of the Prompt Corrective Action (PCA) framework.earlier on January 31, Bank of India, Bank of Maharashtra and Oriental Bank of Commerce (OBC) were taken out of the PCA framework.
In a statement, the RBI said the Board for Financial Supervision (BFS) reviewed the performance of banks under PCA and noted that the government has infused fresh capital on February 21 into various banks including some of the banks currently under the PCA framework.
Of these banks, Allahabad Bank and Corporation Bank had received ₹6,896 crore and ₹9,086 crore, respectively. Capital infusion, the RBI said, has shored up their capital funds and also increased their loan loss provision to ensure that the PCA parameters were complied with.
The RBI further said the two banks have made the necessary disclosures to the stock exchange that post infusion of capital, the capital to risk weighted assets ratio (CRAR), tier 1 capial equity, net non-performing asset (NPA) and leverage ratios are no longer in breach of the PCA thresholds. The banks also apprised RBI of the structural and systemic improvements put in place to maintain these numbers.
“Accordingly, based on the principles adopted by the BFS in its earlier meeting dated January 31, 2019, it was decided in the meeting held on February 26, 2019 that Allahabad Bank and Corporation Bank be taken out of the PCA Framework subject to certain conditions and continuous monitoring,” RBI said.
Commenting on the development, financial services secretary Rajiv Kumar said turnaround of public sector banks continues. “Both (the banks) need to continue to maintain better performance & improved prudential controls for clean banking,” he said in a tweet.
The net NPAS of Corporation Bank stood at 11.47% of the advances at the end of December quarter of this fiscal, up from 10.73% in the same period of previous fiscal. For Allahabad Bank, the net NPA rose to 8.97% from 8.65% a year ago.
The RBI further said it has also decided to take Dhanlaxmi Bank out of the PCA Framework, subject to certain conditions and continuous monitoring, as the bank is found to be not breaching any of the risk thresholds of the PCA framework. Dhanlaxmi Bank’s net NPAS declined to 2.93% of the advances, from 4.08% at the end of the third quarter of 2017-18. The RBI also said it will continuously monitor the performance of the banks under various parameters.
United Bank of India, UCO Bank, Central Bank of India, Indian Overseas Bank and Dena Bank still remain under the PCA framework.