UCO Bank zooms 16% on heavy volume after RBI lifts PCA curbs

UCO bank had requested the regulator to remove the PCA tag after it had successively posted profits for three quarters in FY21

Shares of UCO Bank zoomed 16 per cent to Rs 14.85 apiece in the intra-day deals on Thursday after the Reserve Bank of India (RBI) removed the public sector lender from its PCA (Prompt Corrective Action) framework citing improvement in its financial and credit profile.

The stock witnessed massive volume of 2.87 million shares in just first 15 minutes of trade, as against the 2-week daily average volume of 0.4 million shares on the BSE. At 10:05 am, the stock was up 10 per cent at Rs 14.14 on the BSE as against a 0.17 per cent decline in the S&P BSE Sensex. 

"UCO Bank’s performance was reviewed by the Board of Financial Supervision, which noted that as per bank’s FY21 earnings, the bank is not in breach of the PCA parameters. Further, the bank has provided a written commitment to comply with the norms of Minimum Regulatory Capital, Net NPA and Leverage ratio on an ongoing basis," the RBI said in a statement on Wednesday. READ HERE

UCO Bank had been under PCA since May 2017 and had been barred from increasing risk-weighted assets due to high NPA ratios and negative returns on assets.

The bank had requested the regulator to remove the PCA tag after it had successively posted profits for three quarters in FY21.

During the April-June quarter of FY22 (Q1FY22), UCO Bank reported a near 4-fold jump in net profit at Rs 10.18 crore as against Rs 2.15 crore in Q1FY21. Total income was up marginally by 2.3 per cent at Rs 453.91 crore from Rs 443.66 crore in the said period.

For FY21, the bank had reported a net profit of Rs 16.71 crore and total income of Rs 1,816.64 crore.

The PCA framework, which was introduced by RBI in 2002 and then reviewed in 2017, is a structured early-intervention mechanism to keep a check on bank's financial health, such as asset quality, profitability and capital adequacy.

The aim is to check the problem of Non-Performing Assets (NPAs) in the Indian banking sector, and place under watch banks with weak financial metrics.