The Reserve Bank of India has taken three public sector banks — Bank of India, Bank of Maharashtra and Oriental Bank of Commerce — out of the Prompt Corrective Action (PCA) framework and lifted various restrictions on lending and expansion of businesses.
“The RBI will continuously monitor the performance of these banks under various parameters,” the central bank said on Thursday. The RBI move to place 11 PSU banks — which were hit by high non-performing assets (NPAs) and losses — in the PCA framework last year was one of the contentious issues between the government and the RBI which was then headed by Urjit Patel.
According to the RBI, on a review of the performance of PSU banks currently under the PCA framework, it was noted that a few banks are not in breach of PCA parameters as per their published results for the December 2018 quarter, except Return on Assets (RoA). However, though the RoA continues to be negative, the same is reflected in the capital adequacy indicator, it said.
“These banks have provided a written commitment that they would comply with the norms of minimum regulatory capital, net NPA and leverage ratio on an ongoing basis and have apprised the RBI of the structural and systemic improvements that they have put in place which would help the banks in continuing to meet these commitments,” the RBI said. The Centre has also assured that the capital requirements of these banks will be duly factored in while making allocations during the current financial year, it said.
Taking all these into consideration, it has been decided that Bank of India and Bank of Maharashtra which meet the regulatory norms including capital conservation buffer (CCB) and have net NPAs of less than 6 per cent as per third quarter results, are taken out of the PCA framework subject to certain conditions and continuous monitoring, the RBI said. In the case of Oriental Bank of Commerce, though the net NPA was 7.15 per cent, as per the published results of third quarter, the government has since infused sufficient capital and bank has brought the net NPA to less than 6 per cent. “Hence, it has been decided to remove the restrictions placed on Oriental Bank of Commerce under PCA framework subject to certain conditions and close monitoring,” the RBI said.
Eight PSU banks — IDBI Bank, UCO Bank, Central Bank of India, Indian Overseas Bank, Dena Bank, United Bank of India, Corporation Bank and Allahabad Bank — are still under the PCA framework.
AS Rajeev, MD & CEO, Bank of Maharashtra said, “We would like to thank the government for the recent capital infusion of Rs 4,498 crore and all employees for their efforts to help us exit the PCA framework and steer the bank towards growth … As the bank steps out of the PCA framework, we aim to continue our higher growth trajectory and enhance lending to key sectors …retail, agriculture and MSME.”