New Delhi: In a good news for banking sector, three state owned banks have come out of Prompt Corrective Action (PCA) framework. This will increase lending capacity of state owned banks.
“Great news for banking sector — 3 banks (Bank of Maharashtra, Bank of India and Oriental Bank of Commerce) have come out of PCA norms which will enable credit flow,” said finance minister Piyush Goyal.
He said that this will especially benefit MSME sector and home buyers with easier access to affordable credit.
Of the 21 state-owned banks, 11 were under the PCA framework, which imposes lending and other restrictions on weak lenders.
"Banks need to be more responsible, adopt high underwriting & risk management standards to avoid recurrence," Financial Services Secretary Rajeev Kumar said.
Earlier in the day, Reuters, quoting a highly-placed source, reported that the move follows improvements in their asset quality and capital ratios and a ruling by the RBI on Thursday, said the source, who asked not to be identified as the discussions are private.
The RBI’s board for financial supervision chaired by new governor Shaktikanta Das took the decision at its meeting on Thursday after reviewing the latest quarterly performance of all 11 banks on the PCA list, the source said.
Bank of India shares rose as much as 5 per cent after the news before ending 3.65 per cent higher.
Bank of Maharashtra rose as much as 5.6 per cent before ending up 3.2 per cent.
Bank of India’s net non-performing assets fell to 5.87 per cent in the October-December quarter from 7.64 per cent in July-September. Its capital adequacy ratio improved to 12.47 per cent from 10.93 per cent.
Bank of Maharashtra’s net non-performing assets fell to 5.91 per cent from 10.61 per cent while its capital adequacy improved to 11.05 per cent from 9.87 per cent.
The government increased its planned capital infusion into state banks by Rs 410 billion ($5.76 billion) to Rs 1.76 trillion in the current fiscal year ending March.
