All eyes on Central Bank, Indian Overseas Bank after UCO exits PCA

After UCO Bank's exit from the prompt corrective action (PCA) regime, two public sector lenders - Indian Overseas Bank and Central Bank of India - are waiting to get out of the framework as well. The Reserve Bank of India (RBI) is examining the performance of both banks.

Besides Kolkata-based public sector lender UCO Bank, the RBI took private lender IDBI Bank out of the PCA regime in March 2017. Last month, RBI Governor Shaktikanta Das had said that if a bank meets the regulatory requirements, the RBI will do the needful (remove it from PCA).

In June 2017, the banking regulator had placed Mumbai-based Central Bank under PCA in view of high net non-performing assets (NPAs) and negative return on assets (RoA). Its NPAs were at 10.2 per cent and RoA was minus 0.8 per cent for the year ended March 2017 (FY17).

Central Bank in its annual report for 2020-21 said it was complying with the PCA framework norms meticulously. It has prepared an action plan and taken steps to reduce NPA and improve profitability.

Its net NPAs declined from 7.63 per cent in March 2020 to 5.77 per cent in March 2021. They dipped further to 5.09 per cent in June 2021.

As for IOB, the banking regulator had placed the Chennai-based lender under PCA in October 2015 due to high net NPA and negative RoA. Its NPAs were at 6.31 per cent as of June 30, 2015.

The net NPAs of IOB declined from 5.44 per cent in March 2020 to 3.58 per cent in March 2021 - below the PCA threshold. They went down further to 3.2 per cent in June 2021. The bank has moved the RBI with the request to move it out of the regime since it meets the key parameters of net NPA and RoA.