RBI removes PCA curbs on Oriental Bank of Commerce
MUMBAI: In a development that could kick-start serious debates on the current banking scenario in the context of asset quality and capitalization, Bank of India (BOI) and Bank of Maharashtra (BOM) have been freed from Prompt Corrective Action Framework (PCAF), whereas in the case of Oriental Bank of Commerce (OBC), the restrictions under PCA framework have been removed.
Twelve have been under PCA framework for failing to satisfy the parameters set by RBI on capital adequacy, return on assets (RoA) and asset quality. Out of the 12 banks, 11 are public sector banks, the remaining one being the private sector bank – the Thrissur-based (Kerala) Dhanlaxmi Bank.
These banks have been under strict control with regard to credit growth, dividend distribution, branch expansion, etc.
RBI said that a review proved that a few banks currently under PCAF are not in breach of the PCA parameters as per their published results for the quarter ending December 2018 except on return on assets (RoA).
“However, though the RoA continues to be negative, the same is reflected in the capital adequacy indicator,” the RBI statement noted.
These banks have already provided a written commitment that they would comply with the norms of minimum regulatory capital, net NPA and leverage ratio on an ongoing basis, and at the same time, have apprised the RBI of the structural and systemic improvements they have put in place.
These steps, RBI believes, would help the banks in continuing to meet the commitments. RBI said that the Government had also assured that the capital requirements of these banks would be duly factored in while making bank-wise allocations during the current financial year.
“Considering all these factors, it has been decided that these two banks, which meet the regulatory norms including Capital Conservation Buffer (CCB) and having net NPA below 6 per cent as per Q3 results, are taken out of the PCA framework subject to certain conditions and continuous monitoring,” the RBI added.
In the case of Oriental Bank of Commerce (OBC), though the net NPA was higher at 7.15 per cent as per the Q3 results, the Government has since infused sufficient capital, and the bank has brought the net NPA to less than 6 per cent.
“Hence, it has been decided to remove the restrictions placed on Oriental Bank of Commerce under PCA framework subject to certain conditions and close monitoring,” the statement noted.
RBI said it will continuously monitor the performance of these banks under various parameters