The Reserve Bank of India (RBI) has imposed certain restrictions under its prompt corrective action framework (PCA) on state-run lender Bank of India as it reported negative return on asset for two consecutive years and insufficient common equity tier-I capital after non-performing assets zoomed in the last three years. The Mumbai-based lender said in a notification to the exchanges on Wednesday that the action “will contribute to the overall improvement in risk management, asset quality, profitability, efficiency, etc of the Bank.” However, the bank’s stock tanked almost 4% on Wednesday to close the day at ₹174.20.
‘Poor health’
Already more than half a dozen public sector banks face similar sanctions due to their poor health.
The banking regulator has also imposed fresh restrictions on Kolkata-based State-run lender United Bank of India. In an exchange notification, the lender said the additional restrictions were imposed due to high net NPA, low leverage ratio and requirement to raise capital.
“The actions focused on profit retention, capital augmentation, provision coverage, diversification of credit portfolio, rationalisation of expansion and cost control, along with the steps already initiated earlier by the bank,” UBI said.
The bank also said normal activities would remain unaffected and would not have any material impact on the performance.
