Reserve Bank of India. Banks placed under the PCA framework face restrictions on distributing dividends, remitting profits, branch expansion, higher provisions for bad loans and restrictions on management compensation. Photo: Mint
Reserve Bank of India. Banks placed under the PCA framework face restrictions on distributing dividends, remitting profits, branch expansion, higher provisions for bad loans and restrictions on management compensation. Photo: Mint

Govt committed to shore up ailing PSBs

Eleven state-run banks with deteriorating financial health are under RBI's prompt corrective action framework after failing to meet the parameters set for capital adequacy and non-performing loans

New Delhi:The government is committed to strengthening state-run banks placed under the prompt corrective action (PCA) framework by the Reserve Bank of India (RBI), finance, railway and coal minister Piyush Goyal said on Thursday.

Eleven state-run banks with deteriorating financial health are under RBI’s prompt corrective action framework after failing to meet the parameters set for capital adequacy and non-performing loans.

These banks are looking to the government—the majority shareholder—to pump in capital to shore up their books.

“We will ensure that the central government gives every possible support to further strengthen the resolve of these banks to come out of the PCA framework as quickly as possible," Goyal said after a review meeting with the chiefs of these 11 banks.

Banks placed under the PCA framework face restrictions—depending on the degree of deterioration—on distributing dividends, remitting profits, branch expansion, higher provisions for bad loans and restrictions on management compensation. If required, the central bank can also place curbs on lending, like it did recently in the case of Dena Bank and Allahabad Bank.

Besides Dena Bank and Allahabad Bank, the other banks under PCA are Bank of India, Central Bank of India, Corporation Bank, IDBI Bank, UCO Bank, United Bank of India, Indian Overseas Bank, Oriental Bank of Commerce and Bank of Maharashtra.

Goyal said banks would have to show a profit for two years in order to come out of the PCA.

RBI closely monitors these banks’ functioning, including advice on the business model, strategy and changes in top management while suggesting plans for non-performing loans.

Goyal said the government is committed to clean up the banking sector, which has been bearing the brunt of rising bad loans and frauds.

“We will ensure very orderly growth of the industry and highest levels of probity and accountability that is expected of public sector banks," he said, adding that the government is committed to ensure that the banking system is back on its feet and sheds the legacy inherited by the government in 2014.

Close