Allahabad Bank on Wednesday said the Reserve Bank of India (RBI) has initiated ‘prompt corrective action’ (PCA) against the state-run lender over its high bad loans.
High net non-performing assets (NPA) and a negative return on assets (ROA) for two years in a row has prompted the action, the bank said in a regulatory filing, although it added the action would help improve its risk management, asset quality and profits.
The central bank has so far ordered corrective action for about 10 lenders, mostly due to their high bad loan ratios.
Depending on the risk thresholds set in RBI corrective action rules, lenders can be asked by the regulator to restrict branch expansion and make higher provisions on sour loans, among other curbs.
Allahabad Bank shares fell as much as 2.6% in Thursday morning trade.