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RBI initiates PCA against Bank of Maharashtra

IANS | Mumbai |

The Reserve Bank of India (RBI) has initiated "prompt corrective action" (PCA) on state-run lender Bank of Maharashtra in the view of its high non-performing assets (NPAs).

"The RBI vide its letter dated 15 June has initiated PCA for Bank of Maharashtra in view of high net NPA," the bank said in a regulatory filing to the BSE on 17 June.

"This action will not have any material impact on the performance of the bank and will contribute to improve the internal controls of the bank and improvement in its asset quality, profitability and efficiency."

Earlier, the RBI had initiated a PCA on Central Bank of India, IDBI Bank, Indian Overseas Bank, UCO Bank and Dena Bank.

The development follows the 13 April, 2017, revision of the PCA guidelines by the RBI.

In April, the RBI said that capital, asset quality and profitability would be the basis for the PCA framework on which the banks would be monitored and has defined three kinds of risk thresholds.

In a notification issued then, the RBI said mandatory action to be taken when a bank breaches the risk threshold includes restriction on dividend payment, remittance of profits, restriction on branch expansion, higher provisions, restriction on management compensation and director's fees.

"The PCA framework would apply without exception to all banks operating in India, including small banks and foreign banks operating through branches or subsidiaries based on breach of risk thresholds of identified indicators," the RBI had said.

With regard to credit risk related action, the RBI can ask the banks to prepare a time bound plan and commitment for reduction of NPAs; restrict or reduce credit expansion for borrowers below certain rating grades or unrated borrowers/unsecured exposures/loan/concentration of loans in identified sectors or borrowers.