RBI lets three PSBs out of prompt corrective action

MUMBAI: The Reserve Bank of India late on Thursday said three public sector banks, namely Bank of India, Oriental Bank of Commerce and Bank of Maharashtra, have been taken out of the restrictive Prompt Corrective Action Framework (PCA). They were put under PCA for falling profits, rising bad loans and breaching capital norms.

While Bank of India controlled its bad loans bringing it below the threshold level, and its capital rose on government’s fresh capital infusion of Rs 10,086 crore in December, it made a loss in the third quarter trying to clean up its books and provide more for bad loans.

“…It has been decided that Bank of India and Bank of Maharashtra, which meet the regulatory norms including Capital Conservation Buffer (CCB) and have Net NPAs of less than 6 per cent as per third quarter results, are taken out of the PCA framework subject to certain conditions and continuous monitoring,” RBI said.

Oriental Bank of Commerce though had a net NPA of 7.15 per cent as at the end of third quarter, fresh capital infusion by the government (Rs 5,500 crore in January) brought its NPA to less than 6 per cent prompting RBI to let the bank out of PCA. Bank of Maharashtra had also received government’s capital to the tune of Rs 4,498 crore in January.

Finance ministry has been in a hurry since December allocating fresh capital to the 11 banks under the PCA to get them out of it  — the issue had also been a contentious one between the government and the former RBI governor Urijit Patel. RBI was unwilling to relax the PCA norms and finance ministry was pushing for at least the 4-5 banks that were under threshold-1 of PCA to be taken out of it.
RBI said the three banks out of PCA have provided written commitment that they would comply with the capital norms, NPA and leverage ratio on an ongoing basis. 

“Further, the government has also assured that the capital requirements of these banks will be duly factored in while making bank-wise allocations during the current financial year,” RBI said.