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Govt to review position of 11 PSBs under PCA on May 17

Press Trust of India  |  New Delhi 

Terming the lending restriction on some banks as temporary phenomenon, today said the status of all 11 state-owned banks under (PCA) of the RBI would be reviewed on May 17.

The review meeting would deliberate on steps taken by these banks to come out of the status.

"We have requested all of them (banks) to join us on May 17. The review meeting is happening on May 17. So, they have taken measures to come out of it as these (actions) are temporary phenomenon," Kumar told reporters.

He further said the banks which are out of the ambit have a crucial role to play in the

"The non-PCA banks have to lead the growth. Loan demand is picking up, so they have to support economic activity," Kumar said.

Meanwhile, Allahabad today said the RBI has imposed restriction on lending and deposit taking by the following deterioration in its financial health.

Earlier last week, public sector Dena was also put under restriction by the RBI in terms of lending and recruitment by the to high bad loans on its books.

Dena Bank's gross non-performing assets (NPAs) have hit a high of 22.4 per cent of the gross advances as on March 31, 2018 (Rs 16,361.44 crore), from 16.27 per cent as of end-March 2017 (Rs 12,618.73 crore).

Net NPAs were also up at 11.95 per cent (Rs 7,838.78 crore) from 10.66 per cent (Rs 7,735.12 crore).

The high level of NPAs resulted into the bank reporting widening of its net loss to Rs 1,225.42 crore in the March quarter from a net loss of Rs 575.26 crore in the same period year earlier.

Speaking on Dena Bank, Kumar said, "If you read the reforms agenda it very clearly say that each PCA bank will adopt the differentiated strategy.

"There were conditions that they will not increase RWAs (risk weighted assets). So therefore, keep connecting dots. Don't see any action in isolation. It is happening step by step and it will keep happening till entire cleaning takes place."

Kumar said, albeit a measure like PCA, each bank is an article of faith.

"Wth each bank, people's emotion, culture and sentiments are attached. So PCA, non-PCA is only a temporary phenomenon in terms of cleaning exercise. If huge amount of cleaning has to take place, you have to halt for sometime. In the cleaning exercise you cannot shy away from dust," he said.

As per the revised PCA guidelines released last year, if a bank enters Risk Threshold 3', it may be a candidate for amalgamation, reconstruction or even be wound up. Among the many metrics that are used to gauge a lender's weakness are capital, net NPAs, RoA and Tier 1 leverage ratio etc.

Under the PCA, banks face restrictions on distributing dividends and remitting profits. The owner may be asked to infuse capital into the lender. That apart, lenders would also be stopped from expanding their branch networks. It would need to maintain higher provisions and management compensation and directors' fees would be capped.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, May 14 2018. 20:31 IST