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RBI tells Dena Bank to stop lending, puts it under prompt corrective action

The bank's loss widened from Rs 3.8 billion in December quarter of 2017-18

Press Trust of India  |  New Delhi 

RBI tells Dena Bank to stop lending, puts it under prompt corrective action

Reserve Bank has initiated prompt corrective action against public sector lender in view of high non-performing loans, restricting the bank from giving fresh credit and new hiring.

The public sector lender on Friday reported widening of its net loss to Rs 12.25 billion in the March quarter on mounting bad loans and higher provisioning to cover them.

The net loss stood at Rs 5.75 billion in the January-March quarter of 2016-17.

Sequentially, the loss widened from Rs 3.8 billion in December quarter of 2017-18.

"Reserve Bank of India, vide their letter dated May 31, 2017, has initiated Prompt Corrective Action for and imposed certain restrictions, in view of high Net NPA and negative RoA ( return on assets)," the bank said in a regulatory filing.

In continuation to the above, "we wish to inform that the vide their letter dated May 07, 2018 (received by the Bank on May 08, 2018) has restricted the Bank from assuming fresh credit exposure and recruitment of staff," it said further.

said it was put up to the Board in its meeting held on May 11, 2018.

ALSO READ: Fresh lending dries up at Dena Bank; Q4 net loss widens to Rs 12.25 bn

Bank's asset quality has worsened with the gross NPAs hitting a high of 22.4 per cent of the gross advances as on March 31, 2018, from 16.27 per cent as of end-March 2017.

In value terms, the gross NPAs or bad loans rose to Rs 163.61 billion from Rs 126.18 billion.

Net NPAs were also up at 11.95 per cent (Rs 78.38 billion) from 10.66 per cent (Rs 77.35 billion).

Earlier in January this year, Allahabad Bank had informed about being placed under RBI's PCA mechanism.

The has initiated similar action against other public sector banks, including IDBI Bank, Indian Overseas Bank and UCO Bank before this.

The in April 2017 had issued a new set of enabling provisions under the revised PCA framework with a clause that if the bank does not show improvement then it could be either be merged or taken over by other bank.

First Published: Sat, May 12 2018. 11:49 IST
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