Some of the public sector banks are likely to come out of the Prompt Corrective Action (PCA) framework in next few months on the back of improvement in various parameters, a top finance ministry official said.
Eleven out of the total 21 public sector banks are under the central bank's PCA framework, which imposes lending restrictions and prevents them from expanding, among other curbs.
"Some of the banks out of 11 have shown better performance...If some banks are performing well and they are adequately capitalised as per the Basel norms. Hence, capitalisation will facilitate them coming out of PCA. RBI is seized of the matter," Financial Services Secretary Rajiv Kumar told PTI.
There is a strong case on the basis of performance of some banks to be removed from the PCA list if not all, he said.
Recently, the government announced infusion of Rs 28,615 crore into seven public sector banks (PSBs) through recapitalisation bonds. Out of the seven state-owned banks, Bank of India got the highest amount of Rs 10,086 crore, followed by Oriental Bank of Commerce, which received 5,500 crore.
Other banks that got capital included Bank of Maharashtra (Rs 4,498 crore), UCO Bank (Rs 3,056 crore) and United Bank of India (Rs 2,159 crore).
Kumar expressed hope that those who are not performing well, they should improve their results.
"They need to improve all parameters of NPAs, capital savings, non-core assets monetisation etc. All that agenda have been given to them," he said.
The recapitalisation will enhance the lending capacity of public sector banks and help them come out of the RBI's watch list. These include Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Dena Bank and Bank of Maharashtra.
The PCA framework kicks in when banks breach any of the three key regulatory trigger points -- namely capital to risk weighted assets ratio, net non-performing assets (NPA) and return on assets (RoA).
Globally, PCA kicks in only when banks slip on a single parameter of capital adequacy ratio, and the government and some of the independent directors of the RBI board, like S Gurumurthy, are in favour of this practice being adopted for the domestic banking sector as well.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)