Corp Bank, Allahabad Bank, Dhanlaxmi Bank Out Of PCA

The Reserve Bank of India seems inclined to bring more banks out of its restrictive prompt corrective action (PCA) framework. On Tuesday, the central bank took Allahabad Bank, Corporation Bank and Dhanlaxmi Bank out of PCA, thereby removing the constraints placed on these banks in terms of lending and undertaking branch expansion.

On January 31, the RBI had taken Bank of India and Bank of Maharashtra out of the PCA framework. The central bank had also removed the restrictions placed on Oriental Bank of Commerce under PCA framework, subject to certain conditions and close monitoring.

In the last few years, 11 out of 21 public sector banks (PSBs) were placed under PCA. Of the 11 PSBs, four are now out of PCA.

The RBI’s Board for Financial Supervision (BFS), in its meeting held on Tuesday, reviewed the performance of banks under PCA, and noted that the government has infused fresh capital on February 21, 2019, into various banks, including some of the banks that are currently under the PCA framework.

Of these banks, BFS noted that Allahabad Bank and Corporation Bank had received ₹6,896 crore and ₹9,086 crore, respectively. This has shored up their capital funds, and also increased their loan-loss provision to ensure that the PCA parameters are complied with.

The two banks, according to the RBI, have also made the necessary disclosures to the stock exchange that post infusion of capital, CRAR (capital-to-risk-weighted assets ratio), CET (Common Equity Tier) 1, Net NPA (non-performing asset) and Leverage Ratios are no longer in breach of the PCA thresholds.

The banks also apprised the RBI of the structural and systemic improvements put in place to maintain these numbers.