PSBs set 2020 as deadline to exit RBI’s PCA watch

New Delhi: The eleven state-run banks that are under the Reserve Bank’s watchlist for mounting bad loans on Tuesday told a Parliamentary Committee that they are hopeful to emerge out of RBI’s Prompt Corrective Action framework by 2020.

However, the RBI on Tuesday painted a gloomy picture saying that gross bad loans as percentage of total advances of banks are likely to rise from 11.6 per cent in March 2018 to 12.2 per cent by the end of the current fiscal. In its Financial Stability Report (FSR), the RBI said stress in the banking sector continues as gross non-performing advances (GNPA) ratio rises further.

Referring to the 11 state-owned banks under prompt corrective action framework (PCA),  the RBI said they may experience worsening of their GNPA ratio from 21 per cent in March 2018 to 22.3 per cent by this fiscal-end.

Of the 11 banks, six are likely to experience capital shortfall relative to the required minimum CRAR (Risk-weighted Assets Ratio) of 9 per cent.

During the Standing Committee on Finance meeting, which is headed by Congress leader M. Veerappa Moily concerns were also raised about the “stagnation in lending operations” of state-owned banks, said sources.

“They talked about the roadmap to deal with their NPAs and expressed confidence of coming out of the RBI’s Prompt Corrective Action framework by 2020,” said sources.

Top officials of the banks made presentations before the panel and responded to queries.

Under the PCA, banks face restrictions on distributing dividends and remitting profits. The owner may be asked to infuse capital into the lender. That apart, lenders will also be stopped from expanding their branch networks.