RBI puts fresh lending restrictions on Allahabad Bank

Recently, the RBI not only debarred Dena Bank from extending fresh credit in view of the deteriorating financial health, but also debarred the lender from recruiting staff

After the Reserve Bank of India (RBI) debarred Dena Bank from fresh lending, it has placed additional restrictions on Kolkata-based Allahabad Bank, which is  under prompt corrective action (PCA) since January this year. The regulator has debarred the bank from high-risk lending and raising high-cost deposits.

The RBI has advised the bank to restrict expansion of risk-weighted assets, reduce exposure to unrated and high-risk advances, Allahabad Bank said in a regulatory filing to the stock exchanges on Monday.

The RBI has also restricted the bank from creation of non-banking assets and has advised it to restrict from accessing or renewing wholesale or costly deposits or certificate of deposits. The board of directors of the bank, in its meeting on May 11, has already taken note of the same, the bank informed in the filing.

Last year, Allahabad Bank had reported 5.27 per cent growth in lending and 5.81 per cent growth in deposits. The deposit growth to large industries fell by 9.11 per cent, while retail loans grew by 

25 per cent.

On account of more than threefold rise in provisioning, Allahabad Bank posted a net loss of Rs 35 billion for the quarter ended March 31, 2018, against a net profit of Rs 1.1 billion for the fourth quarter of the last financial year.  For the whole year, the bank had reported a net loss of about Rs 47 billion, against Rs 3 billion in 2016-17. 

In absolute terms, the gross NPA of the bank in the last quarter stood at Rs 266 billion at the end of last quarter, against Rs 207 billion in the same period last year.

Recently, the RBI not only barred Dena Bank from extending fresh credit in view of the deteriorating financial health, it also barred the lender from recruiting staff.

“We wish to inform that the RBI, vide its letter dated May 7, 2018, has restricted the bank from assuming fresh credit exposure and recruitment of staff,” Dena Bank said in a notification to the stock exchanges 

recently.

As many as 11 of the 21 state-owned banks are under the PCA of the RBI.