New Delhi: The Reserve Bank of India (RBI) has taken off Allahabad Bank, Corporation Bank and Dhanlaxmi Bank from the Prompt Corrective Action (PCA) framework allowing them to resume their normal lending activities.
The Board for Financial Supervision (BFS) met on Tuesday to review the performance of banks under PCA and noted that the government has infused fresh capital into various banks including some of the banks currently under the PCA framework.
"PSBs turnaround continues! Strategy enables PSBs Allahabad and Corp Banks to exit PCA. Both need to continue to maintain better performance and improved prudential controls for clean banking," Banking Secretary Rajeev Kumar tweeted.
IANS first broke the story on Allahabad Bank and Corporation Bank coming out of PCA on February 20.
The BFS noted that Allahabad Bank and Corporation Bank had received Rs 6,896 crore and Rs 9,086 crore respectively. This has shored up their capital funds and also increased their loan loss provision to ensure that the PCA parameters were complied with.
The two banks have also made the necessary disclosures to the Stock Exchange that post infusion of capital, the CRAR, CET1, Net NPA and Leverage Ratios are no longer in breach of the PCA thresholds, said RBI.
The banks also apprised RBI of the structural and systemic improvements put in place to maintain these numbers. Accordingly, it was decided that Allahabad Bank and Corporation Bank be taken out of the PCA Framework subject to certain conditions and continuous monitoring, the central bank said.
It has also been decided to take Dhanlaxmi Bank out of the PCA Framework, subject to certain conditions and continuous monitoring, as the bank was found to be not breaching any of the Risk Thresholds of the PCA Framework.
RBI will continuously monitor the performance of these banks under various parameters, the RBI stated.
Earlier, the RBI had taken out Bank of India, Bank of Maharashtra and Oriential Bank of Commerce (OBC) out of PCA.
Depending on the risk thresholds set in PCA rules, banks placed under it are restricted from expanding number of branches, staff recruitment and increasing size of their loan book.
Other restrictions include higher provisions for bad loans and disbursal only to those companies with AAA rating.