RBI bars Allahabad Bank from giving fresh loans

The Reserve Bank of India (RBI) has barred state-run Allahabad Bank from extending fresh loans, under it’s prompt corrective action (PCA) framework, after the lender fell short of minimum capital adequacy ratio (CAR) requirement.

The bank’s CAR was 8.69% as on March 31, 2018 against the regulatory minimum requirement of 9%.

Risk threshold breach

According to RBI norms, Allahabad Bank had breached the first risk threshold for capital which is breach of either CAR or common equity tier 1 (CET1) ratio. The bank was already facing some restrictions under PCA framework for breaching net NPA norms. The bank reported a net loss of ₹3,510 crore in the January-March quarter and ₹4,674 crore loss for the financial year 2017-18.

According to a regulatory filing by Allahabad Bank, RBI had also asked the Kolkata-based lender to reduce its exposure to unrated and high risk advances. The central bank also restricted the lender’s access to raise high cost deposits and creation of non-banking assets.

On Friday, Dena Bank had informed the stock exchanges about lending restrictions imposed by the RBI after it breached the second risk threshold for net NPAs and return on asset norms. The Mumbai-based state-run lender’s stock tanked 5.42% on Monday to close the day at ₹17.45 on the BSE.