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Shares of Indian Overseas Bank (IOB) surged over 20% in Thursday's early deals on the BSE after the Reserve Bank of India (RBI) removed the lender from the Prompt Corrective Action Framework (PCAF).

The central bank on Wednesday removed IOB from the PCA framework, which was placed in 2015, following improvement in various parameters and a written commitment that the state-owned lender will comply with the minimum capital norms.

On a review of the performance of the IOB, the Board for Financial Supervision on the basis of the published financial results for 2020-21, found that the bank was not in breach of the PCA parameter, the RBI said in a statement.

The bank has provided a written commitment that it would comply with the norms of Minimum Regulatory Capital, Net NPA and Leverage ratio on an ongoing basis, it added.

The lender has also apprised the RBI of the structural and systemic improvements that it has put in place, which would help the bank in continuing to meet these commitments.

Earlier this month, Kolkata-based lender UCO Bank was removed from the PCA framework which was placed on the bank four years ago due to its deteriorating financial health.

The central bank in March had removed another state-run lender, IDBI Bank Ltd, from its PCA list. Following UCO Bank and Indian Overseas Bank's exit, Central Bank of India currently remains under the PCA framework. 

Under RBI rules, prompt corrective action is triggered if a bank has breached certain regulatory thresholds in bad loans and capital adequacy.

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