Mumbai, June 15: The Reserve Bank of India (RBI) took “prompt corrective action” (PCA) on Central Bank of India for its high non-performing assets (NPAs) and negative return on assets (RoAs).
“RBI, vide the letter dated June 13, 2017, has put the bank under Prompt Corrective Action in view of high net NPA and negative RoA,” the Central Bank of India said in a regulatory filing to the BSE.
“We believe that corrective measures arising out of the PCA will help in improving overall performance of the bank.”
The RBI had also initiated PCA on IDBI Bank, Indian Overseas Bank, UCO Bank and Dena Bank on the basis of capital, asset quality and profitability and has defined three kinds of risk thresholds.
The development follows the April 13, 2017, revision of the PCA guidelines by the RBI.
Mandatory action to be taken when a bank breaches the risk includes restriction on dividend payment, remittance of profits, restriction on branch expansion, higher provisions, restriction on management compensation and director’s fees, according to RBI.
“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.
Banks has to cut NPA’s within time frame, 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’s net NPA to net advances increased to 10.20 per cent as on March 31, 2017.