Allahabad Bank on Monday said the Reserve Bank of India (RBI) has advised the lender to restrict expansion of risk-weighted assets (RWA). Moreover, the central bank has asked the Kolkata-headquartered lender to reduce exposure to high-risk loans and restrict accessing or renewing wholesale deposits, the bank said.
RWA is a measure of the minimum capital requirement for a specific asset; typically, a loan backed by collateral attracts a lower risk weight than loans that are unsecured.
Allahabad Bank was placed under the RBI’s prompt corrective action (PCA) scheme in January. The lender reported a net loss of Rs 3,510 crore in the March quarter of 2017-18. While the bank’s net non-performing assets fell 93 basis points sequentially to 8.04 per cent, its return on assets stood at a negative 5.77 per cent in Q4FY18. The bank had registered a net profit of Rs 111.16 crore in the same quarter of preceding fiscal 2016-17.
Last week, the central bank had also imposed a lending ban on Dena Bank which was also placed under PCA some months ago.
Given the poor results posted by other public sector banks (PSBs), at least another four could face similar restrictions if net bad loan ratios are anything to go by. Eleven PSBs under PCA own 30 per cent and 29 per cent of all deposits and advances with PSBs, respectively, Capitaline data showed. FE