Govt says no question of closing any PSB

Dismissing rumours, both the government and the Reserve Bank said on Friday there was no question of closing any public sector bank (PSB).

The decision of the Reserve Bank to initiate a Prompt Corrective Action (PCA) against large state-owned Bank of India led to rumours that the government may close down some banks.

The RBI said it has come across some "misinformed communication" in some section of media, including social media, about closure of some PSBs in the wake of their being placed under the PCA.

The government, too, dismissed the rumours, saying on the contrary, it is planning to strengthen state-owned banks.

"The government is strengthening PSBs by ~2.11lakh-crore recapitalisation plan. Do not believe rumour mongers. Recap, Reforms road map for PSBs firmly on track," said financial services Secretary Rajeev Kumar in a tweet.

The RBI said, "the PCA framework is not intended to constrain normal operations of the banks for the general public".

The central bank had issued a similar clarification in June also. It emphasised that the PCA framework has been in operation since December 2002 and the guidelines issued on April 13 are only a revised version of the earlier framework.

Besides Bank of India, the RBI has also initiated similar action against other PSBs, including IDBI Bank, Indian Overseas Bank and UCO Bank.

The RBI said that under its supervisory framework, it uses variousmeasures/tools tomaintain sound financial health of banks. "The PCA framework is one of such supervisory tools, which involves monitoring of certain performance indicators of the banks as an early warning exercise and is initiated once such thresholds as relating to capital, asset quality etc. are breached," it said.