State-owned lender IDBI Bank on 9 May evening said that Reserve Bank of India (RBI) has initiated a "prompt corrective action" (PCA) in view of its high non-performing assets (NPAs) and negative return on assets (RoAs).
"RBI, vide their letter dated 5 May, 2017, has initiated PCA for IDBI Bank in view of high NPA and negative RoA," IDBI Bank in a regulatory filing to the BSE.
"This action will not have any material impact on the performance of the bank and will contribute to improving the internal controls of the bank and improvement in its activity."
The development follows 13 April, 2017 revision of the PCA guidelines by RBI.
Last month, RBI said that capital, asset quality and profitability would be the basis of the PCA framework on which the banks would be monitored and has defined three kinds of risk thresholds.
In a notification issued by RBI that time, the mandatory action that would 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.
The bank had posted a net loss of Rs.2,254.96 crore for the quarter ended 31 December, 2016, as compared to net loss of Rs.2,183.68 crore for the quarter ended December 31, 2015.