In view of high non-performing assets (NPAs) and negative return on assets (RoA) of Dena Bank, the Reserve Bank of India has initiated Prompt Corrective Action (PCA) for the public lender.
"The RBI, through its letter dated May 31, has initiated Prompt Corrective Action for Dena Bank in view of high Net NPA and negative RoA," the public sector bank said in a BSE filing here on Friday.
Under the PCA, the RBI can ask the banks to prepare a time-bound plan and commitment for reduction of NPAs, restrict or reduce credit expansion for borrowers below certain rating grades.
However, the bank said this action will not have any material impact on the bank's performance but will help improve its internal controls and activities.
The development follows revision of the PCA guidelines by the RBI on April 13.
The RBI had said that capital, asset quality, and profitability will be the basis of the PCA framework on which the banks will be monitored.
The mandatory action to be taken when a bank breaches the risk threshold includes restriction on dividend payment/remittance of profits, restriction on branch expansion, higher provisions, restriction on management compensation and director's fees.
The PCA framework applies without exception to all banks operating in India, including small and foreign banks operating through branches or subsidiaries, based on breach of risk thresholds of identified indicators.
--IANS
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