RBI initiates prompt corrective action against Dena Bank
RBI’s prompt corrective action (PCA) will place various restrictions on Dena Bank, including on fresh loans and dividend distribution
Mumbai: Dena Bank on Friday said the Reserve Bank of India (RBI) had initiated prompt corrective action (PCA) at the lender because of high net non-performing assets (NPA) and negative return on assets.
The lender, which made the announcement in a statement to the stock exchange, is the third bank after IDBI Bank and UCO Bank where PCA has been initiated under a revised framework.
RBI has mandated a maximum net NPA ratio of 6% under the PCA framework introduced in April, and breaching it could result in the central bank asking lenders to sell assets, cut unsecured exposure and so on.
Net NPA ratio at the end of the fourth quarter for the bank stood at 10.66% from 9.52% in the third quarter. Return on assets stood at -1.02% and -0.67% for financial year 2015-16 and 2016-17 respectively.
The management of Dena Bank, while announcing year-end results, said the lender will not open any branches and there will be no additions to headcount.
Under the revised rules, as many as 16 banks could face RBI intervention if their December quarter numbers are considered.
“This action will not have any material impact on the performance of the bank and will contribute to improve the internal controls of the bank..,” the bank said.