The Reserve Bank of India (RBI) has initiated “prompt corrective action” (PCA) against state-run lender Corporation Bank in the view…
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The Reserve Bank of India (RBI) has initiated “prompt corrective action” (PCA) against state-run lender Corporation Bank in the view of its high non-performing assets (NPAs).
“The RBI vide their letter dated December 7, 2017 has placed the bank under PCA framework in view of high NPA and requirement to raise capital of the bank,” the state-run lender said in a regulatory filing to the BSE on Wednesday.
“This action will not have any material impact on the performance of the bank and will contribute to improvement in internal control of the bank in its activities.”
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Earlier, the RBI had initiated PCA on Bank of Maharashtra, Central Bank of India, IDBI Bank, Indian Overseas Bank, UCO Bank and Dena Bank.
The development follows the April 13, 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.
In addition, 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.
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