RBI puts 4 PSBs under watch over asset quality concerns

The PSBs have been advised by Finance Min  and the RBI to improve their financials, look for options for capital infusion and create  a self-sustaining model by selling assets

New Delhi : The Reserve Bank has put four public sector lenders (PSBs), including IDBI Bank and Indian Overseas Bank, under watch and advised them to stay off risky assets so that their financial health is not stressed further.

While UCO Bank also figures in the list, the name of the fourth lender could not be immediately ascertained. Sources said these lenders were on the RBI’s radar as their financial health may not improve after the central bank’s asset quality review (AQR) comes to an end on March 31. These banks have been advised by both the Finance Ministry and the RBI to improve their financials, look for avenues for in capital infusion and create a self-sustaining model by selling assets, they added.

Queries sent to the RBI did not elicit any response, while no comments were available from the four lenders. RBI had embarked on the AQR exercise from December 2015 and asked banks to recognise some top defaulting accounts as NPAs and provide for them.

The move resulted in a spike in bad assets with lenders recognising over

Rs 1 lakh crore of bad assets in the December quarter alone. On an year-on-year basis, the gross NPA of Indian Overseas Bank (IOB) increased by 52 per cent to Rs 34,502.13 crore at the end of December 2016, while the loss stood at Rs 554 crore. Similarly, the gross NPA of IDBI Bank spurted by 80 per cent to

Rs 35,245 crore and it booked a loss Rs 2,255 crore. The government recently shifted IDBI Bank’s MD and CEO Kishor Kharat to Indian Bank. M K Jain, MD and CEO of Indian Bank, was in turn moved to IDBI Bank.

Kolkata-based UCO Bank’s bottomline too is expected to remain under stress during the fourth quarter ending March 31.

 Its gross NPA during the third quarter surged by 49 per cent to Rs 2,181.26 crore and the loss was Rs 437 crore.

IOB was also put under ‘prompt corrective action’ in 2015 when its gross NPA touched 10 per cent. The RBI has specified certain regulatory trigger points as part of the prompt corrective action (PCA) framework.

They include three parameters — capital to risk weighted assets ratio (CRAR), net NPA and Return on Assets (RoA), for initiation of certain structured and discretionary steps.

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