RBI PCA: Operational curbs on these state-run banks may be lifted soon

Mumbai: State-run Corporation Bank, which is still under the Reserve Bank’s prompt corrective action (PCA) framework, on Wednesday said the latest government move to pump an additional Rs 9,086 crore capital into it will help it exit the restrictive lending norms.

The funds will be used to increase provisions, managing director and chief executive PV Bharathi said. With Rs 9,086 crore of government capital, Corporation Bank is the biggest beneficiary of the third round of recapitalization this fiscal.

“This capital infusion will help us exit the PCA in the March quarter itself. Our net NPA will be below 6 percent, even if Essar Steel resolution doesn’t happen this fiscal year as we will use these funds to make additional provisions,” Bharathi told reporters on the sidelines of a banking technology meet organised by the Indian Banks Association.

She said recoveries have improved and the bank’s net NPA levels have come down to 11.47 percent as of December 2018 while the gross NPA improved to 117.36 percent.

The bank’s recovery in the first nine month stood at Rs 4,600 crore and it expect more recoveries from bad loans in the upcoming quarters.

“We’ve taken more defaulters to the NCLTs, apart from RBI’s two NCLT lists. We have 100 cases in various NCLTs now where we have started to get very good recoveries,” she said.

Earlier in the day, the government announced Rs 48,239 crore of fresh capital pumping into 12 nearly crippled state- run banks for this fiscal to help them maintain regulatory capital requirements and finance growth plans.

Financial services secretary Rajiv Kumar said the government will infuse Rs 9,086 crore into Corporation Bank and Rs 6,896 crore into Allahabad Bank– the two “better- performing” banks currently under the PCA.

Further, Rs 4,638 crore and Rs 205 crore will be provided to Bank of India and Bank of Maharashtra. These banks have already come out of the PCA. Kumar further said Punjab National Bank will get Rs 5,908 crore, Union Bank Rs 4,112 crore, Andhra Bank Rs 3,256 crore and Syndicate Bank Rs 1,603 crore.

The government will pump in Rs 12,535 crore in four other banks under PCA–Central Bank of India, United Bank, UCO Bank and Indian Overseas Bank.

The government in December had infused Rs 28,615 crore into seven banks through recapitalisation bonds.

The other 10 banks under the PCA include Allahabad Bank (17.81 percent GNPA and 7.7 percent NNPA), Dena Bank (19.77 percent GNPA and 10.32 percent NNPA)–both these banks have been merged with BoB; Central Bank (20.64 percent GNPA and 10.32 percent NNPA), IDBI Bank (29.67 percent GNPA and 14.01 percent NNPA), Indian Overseas Bank (23.76 percent GNPA and 13.56 percent NNPA), Uco Bank (27.39 percent GNPA and 12.48 percent NNPA), and Union Bank (21.27 percent GNPA and 12.08 percent NNPA).

On February 1, the RBI had lifted Bank of Maharashtra (17.31 percent GNPA and 5.9 percent NNPA),  Bank of India (16.31 percent GNPA and 5.87 percent NNPA), and Oriental Bank of Commerce (15.82 percent GNPA and 7.15 percent NNPA) following marked improvements in their capital positions and asset quality.

Media reports yesterday said Dena Bank, Central Bank of India and Allahabad Bank may come out of the curbs soon. The PCA framework imposes operational curbs on state- run lenders such as large ticket lending, branch expansion paying dividends among others.

Coming out of the framework means these banks can function normally and freely.

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