Three PSU banks rise after RBI removes lending curbs

Allahabad Bank, Corporation Bank and Dhanlaxmi Bank advanced at 11:50 IST on BSE after the Reserve Bank of India permitted these banks to exit the prompt corrective action framework.

Corporation Bank (up 7.02%), Allahabad Bank (up 6.27%) and Dhanlaxmi Bank (up 10%), edged higher.

The S&P BSE Sensex was up 125.19 points, 0.35% at 36,098.90.

The Reserve Bank of India (RBI)'s board for financial supervision (BFS), in its meeting held on 26 February 2019, reviewed the performance of banks under Prompt Corrective Action (PCA) framework and noted that the Government of India has infused fresh capital on 21 February 2019 into various banks including some of the banks currently under the PCA framework.

Of these banks, the BFS noted that Allahabad Bank and Corporation Bank had received Rs 6896 crore and Rs 9086 crore respectively. This has shored up their capital funds and also increased their loan loss provision to ensure that the PCA parameters were complied with. The two banks have also made the necessary disclosures to the stock exchange that post infusion of capital, the CRAR, CET1, net NPA and leverage ratios are no longer in breach of the PCA thresholds. The banks also apprised RBI of the structural and systemic improvements put in place to maintain these numbers.

Accordingly, based on the principles adopted by the BFS in its earlier meeting dated 31 January 2019, it was decided in the meeting held on 26 February 2019 that Allahabad Bank and Corporation Bank be taken out of the PCA Framework subject to certain conditions and continuous monitoring. It has also been decided to take Dhanlaxmi Bank out of the PCA framework, subject to certain conditions and continuous monitoring, as the bank is found to be not breaching any of the risk thresholds of the PCA framework.

RBI said it will continuously monitor the performance of these banks under various parameters.

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