MUMBAI: Within less than a month since three banks were let off from the fold of prompt corrective action (PCA), the Reserve Bank of India (RBI) on Monday (February 26) has decided to free another three banks – the Thrissur-based Dhanlaxmi Bank, Allahabad Bank and Corporation Bank from the PCA framework, leaving behind just six banks under the framework now.
The earlier batch that was taken out of PCA comprised Bank of India, Bank of Maharashtra and Oriental Bank of Commerce. Businessbenchmark.news had last week run a story indicating that ‘Dhanlaxmi may exit PCA soon’.
There were altogether 12 banks under PCA framework including the lone private sector bank, Dhanlaxmi until close to a month back.
Dhanlaxmi had posted net profit of Rs16.90 crore for the third quarter ending December 31, 2018, thus enjoying the comfort of reporting profit for two consecutive quarters after a long gap, the previous quarter having witnessed Rs12.15 crore net profit.
The new press statement from RBI said that the Board for Financial Supervision (BFS), in its meeting held on February 26, 2019 reviewed the performance of banks under PCA and noted that the Government of India had infused fresh capital on February 21, 2019 into various banks including some of the banks currently under the PCA framework.
“Of these banks, the BFS noted that Allahabad Bank and Corporation Bank had received Rs6,896 crore and Rs9,086 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 statement said.
It went on to explain that these two banks had also made the necessary disclosures to the stock exchange that post infusion of capital, the CRAR, CET1, net NPA and Leverage Ratios were no longer in breach of the PCA thresholds. The banks had also apprised RBI of the structural and systemic improvements put in place to maintain these numbers.
“Accordingly, based on the principles adopted by the BFS in its earlier meeting dated January 31, 2019, it was decided in the meeting held on February 26, 2019 that Allahabad Bank and Corporation Bank be taken out of the PCA Framework subject to certain conditions and continuous monitoring,” the RBI statement said.
RBI further informed that it had 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 made it clear that it would continuously monitor the performance of these banks under various parameters. There have been views expressed by certain banking experts and by many in the government that keeping banks under PCA for long would deprive these banks the opportunity to grow as the PCA comes with certain restrictions on lending among others.