Over the last few days, Reserve Bank of India has started to question state run banks over the substantial increase in bad loans. According to a few inside sources, RBI is closely examining the track record of at least 6 banks because of dealing profit and increased number of bad performing assets.
Over the past one week, RBI officials have held meetings with top officials of the banks in question to seek report over the poor track record over last few months. According to the new guidelines, RBI might initiate prompt corrective action (PCA) against these banks and might look out for stricter options in the time to come.
Under the stricter options, RBI may force weaker banks to merge with stronger ones and might even sack the management of these banks. This is in line to consolidate the weak performance of the banks and to ensure better performance in the time to come. This comes at a time when even the larger banks have failed to collect back the amount from some of the prominent corporates and businesses. The banks under RBI radar include Canara Bank, Bank of India, Union Bank of India, Central Bank of India, Punjab National Bank, Corporation Bank, Andhra Bank, Allahabad Bank, Dena Bank, Indian Overseas Bank and Oriental Bank of Commerce.
Some of these banks might eventually escape PCA because of the fact that their overall operations have shown profits. However, there has not been an official statement over the fate of these banks.