The Reserve Bank of India (RBI) on Friday removed three banks from its Prompt Corrective Action(PCA) framework subject to certain condition and constraints. The three banks are Allahabad Bank, Corporation Bank and Dhanlakhmi Bank.
The move was expected after the government’s recent decision of fresh capital infusion of about Rs 48,000 crore. In the latest round of capital infusion Corporation bank, received maximum Capital of around ₹9,086 Crore, followed by the state lender Allahabad Bank, which got ₹6,896 Crore.
“Allahabad Bank and Corporation Bank be taken out of the PCA Framework subject to certain conditions and continuous monitoring. It has also been decided to take Dhanlaxmi Bank out of the PCA framework, subject to certain conditions and continuous monitoring, as the bank is found to be not breaching any of the Risk Thresholds of the PCA framework.” RBI said in a release.
The Board of financial Supervision (BFS), which takes decision in this regard in its meeting held on 26/02/19 decided that fresh capital infusion by the government on 21/02/19 has shored up their capital funds and also increased their loan loss provision to ensure that the PCA parameters were complied with. The two banks have also made the necessary disclosures to the Stock Exchange that post infusion of capital, the CRAR, CET1, Net NPA and Leverage Ratios are no longer in breach of the PCA thresholds. The banks also apprised RBI of the structural and systemic improvements put in place to maintain these numbers.
The Board also decided to take out Dhanlaxmi Bank out of the PCA framework, as it is now is able to meet the prescribed threshold, but also noted that this is subject to certain conditions and constraints and the regulator will be continuously monitoring lenders performance under various parameters.
Out of 21 State owned lenders, 8 are still Under PCA framework after this latest removal of 3 banks.