The Reserve Bank on Wednesday removed UCO Bank from its Prompt Corrective Action Framework (PCAF) following improvement in various parameters and a written commitment that the state-owned lender will comply with the minimum capital norms.
On a review of the performance of the UCO Bank, the Board for Financial Supervision on the basis of the published financial results for 2020-21 found that the bank was not in breach of the PCA parameter, the RBI said in a statement.
The bank, it said, has also provided a written commitment that it would comply with the norms of Minimum Regulatory Capital, Net NPA and Leverage ratio on an ongoing basis.
The lender has also apprised the RBI of the structural and systemic improvements that it has put in place, which would help the bank in continuing to meet the financial commitments.
"Taking all the above into consideration, it has been decided that UCO Bank is taken out of the PCA restrictions subject to certain conditions and continuous monitoring," the RBI said.
The Kolkata-headquartered lender has been under PCA since May 2017.
PCA is triggered when banks breach certain regulatory requirements such as return on asset, minimum capital and quantum of the non-performing asset.
The restrictions disable banks in several ways to lend freely and force them to operate under a restrictive environment that turns out to be a hurdle to growth.
UCO Bank had posted over a four-fold jump in its net profit to Rs 101.81 crore for the first quarter of the fiscal ended June 30, as bad loans fell significantly.
The lender trimmed its gross non-performing assets (NPAs or bad loans) significantly to 9.37 per cent of the gross advances as of June 30, 2021, as against 14.38 per cent at June-end 2020.
The net NPAs were down at 3.85 per cent (Rs 4,387.25 crore) from 4.95 per cent (Rs 5,138.18 crore).
Shares of UCO Bank closed at Rs 12.81 apiece on BSE, almost flat over Tuesday. The RBI's announcement came after market hours.
Indian Overseas Bank (IOB) and Central Bank of India are still under the PCA framework.