Dena Bank asked to draft capital restoration plan

The Reserve Bank of India (RBI) has come down hard on State-run Dena Bank and asked it to discuss capital restoration plan and strategies for its successful implementation to improve its financial position at its upcoming board meeting on end-March 2003.

The bank will also discuss strategies to cut administrative cost, steps to increase fee-based income and reduce exposure to sensitive sectors like the capital markets, real estate and investment in the non-SLR securities. The bank’s financial health has deteriorated during the last few years and it has tested trigger points in terms of capital to risk weighted asset ratio (CRAR), net NPAs and return on assets (RoA) attracting various actions under the prompt corrective action framework of the central bank.

The RBI has forwarded a set of actions to be implemented by the bank under the PCA framework. Under the RBI Act (1934 and Banking Regulation Act (1949), the apex bank is authorised to take bank-specific supervisory corrective action when the financial position warrants such measures. RBI has asked the bank to apprise the position, which triggered PCA to bank’s board of directors and forward the steps proposed by the board to implement the action points. CRAR was assessed at 7.45% and ratio of net NPA to net advances was at 16.59%.