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RBI initiates Prompt Corrective Action for Dena Bank

Author: IANS/Saturday, June 3, 2017/Categories: Regulatory, Banking & Financial Services

RBI initiates Prompt Corrective Action for Dena Bank

Mumbai (IANS) - In view of high non-performing assets (NPAs) and negative return on assets (RoA) of Dena Bank, the Reserve Bank of India has initiated Prompt Corrective Action (PCA) for the public lender.

"The RBI has initiated Prompt Corrective Action for Dena Bank in view of high Net NPA and negative RoA," the public sector bank said. Under the PCA, the RBI can ask the banks to prepare a time-bound plan and commitment for reduction of NPAs, restrict or reduce credit expansion for borrowers below certain rating grades.

However, the bank said this action will not have any material impact on the bank's performance but will help improve its internal controls and activities. The development follows revision of the PCA guidelines by the RBI on April 13.

The RBI had said that capital, asset quality, and profitability will be the basis of the PCA framework on which the banks will be monitored. The mandatory action to be taken when a bank breaches the risk threshold includes restriction on dividend payment/remittance of profits, restriction on branch expansion, higher provisions, restriction on management compensation and director's fees.

A couple of weeks earlier, the central bank had invoked the PCA on UCO Bank and IDBI Bank as well. UCO Bank took a hit in view of its high net non-performing assets (net NPA) and negative return on assets (RoA). UCO Bank’s asset quality deteriorated further in the March quarter of 2016-17 as its gross non-performing assets in absolute term rose close to 8% to Rs 22,540.95 crore from Rs 20,907.73 crore for the corresponding quarter previous fiscal. Similarly, IDBI Bank was placed under the purview of the PCA after it reported a loss of Rs 2,254.96 crore for the quarter ended December 31, 2016, as compared to net loss of Rs 2,183.68 crore for the quarter ended December 31, 2015.

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S Vijaykrishnan
S Vijaykrishnan

IANS

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