The finance ministry has no plan to ask the Reserve Bank of India (RBI) to relax the prompt corrective action (PCA) framework for stressed public sector banks (PSBs), a top official said on Monday. Instead, the ministry has directed the 11 stressed PSBs that are under the PCA to work hard on their turnaround plans by the reforms agenda given to them, including focussing more on core competencies, adopting differentiated business strategy, selling non-core assets and rationalising loss-making operations.
“We recently held a meeting with the 11 public banks that are under PCA but we have not sought any relaxation in the framework from the regulator,” the finance ministry official said. Asked if these sick banks will be given more funds by the government, the official said capital infusion will be linked to performance.
Chiefs of the 11 stressed PSBs last week met interim finance minister Piyush Goyal and other senior officials with the department of financial services with the progress report on the reforms undertaken by them in lieu of the capital they received from the government, apart from presenting their turnaround plans. The banks under PCA are: IDBI Bank, Bank of India, Uco Bank, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Dena Bank, Bank of Maharashtra, United Bank of India, Corporation Bank and Allahabad Bank.
The meeting took place at a time when the central bank has imposed restrictions on lending by two of these banks — Dena Bank and Allahabad Bank — until they fix their finances.
Four other banks — IDBI Bank (net NPA ratio of 16.02 per cent), Indian Overseas Bank (13.08 per cent), Bank of Maharashtra (12.17 per cent) and United Bank of India (11.96 per cent) — have reported higher net NPA ratio than even Dena Bank (11.52 per cent) for the December quarter. The 11 stressed banks make up for 30 per cent of deposits and 29 per cent of advances of all the 21 PSBs. FE
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