As the burden Non-Performing Assets (NPAs) affecting financial system of the country, Reserve Bank of India is keeping its eye on public sector banks. According to government sources, around 11 government banks are now under the RBI’s Prompt Corrective Action (PCA) framework. The RBI’s PCA framework restricts bank to extend the number of loans, particularly small and medium enterprises (MSMEs). The decline in the performance of banks is the main reason for RBI to take this action. Talking about the matter, a senior banker said, “Since the PCA framework restricts the amount of loans banks can extend, this will definitely put pressure on credit being made available to companies especially the MSMEs.
Large companies have access to the corporate bond market so they may not be impacted immediately.” The 11 banks which are already under the NPA framework are IDBI Bank, Bank of India, UCO Bank, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Dena, Bank of Maharashtra, United Bank of India, Corporation Bank and Allahabad Bank. Rating agency in a report last month said that 5 could be brought under the PCA – Canara Bank, Union Bank, Andhra Bank, Punjab National Bank and Punjab & Sind Bank. If these banks perform well on regulatory indicators, RBI will put them out of PCA. Regulatory norms include issues such as minimum capital, amount of non-performing assets and return on assets.
Currently, ICICI Bank-Videocon loan case is being probed by investigating agencies. The case includes the fraudulent transactions which have now amounted to a huge NPA (Non-performing assets). As per reports, Videocon Group owned by Venugopal Dhoot after taking the Rs 3,250 crore loan from ICICI Bank had invested a large part of the amount to a company named Supreme Energy, an entity owned by him, the ownership of which he later shifted to Deepak Kochhar at a meagre amount of Rs 9 lakh.
Gross Non-Performing Assets % as on Dec 31, 2017 (Source: RBI):
IDBI Bank – 24
UCO Bank – 23.29
Indian Overseas Bank – 22.74
United Bank of India – 20.1
Dena Bank – 19.56
Bank of Maharashtra – 19.5
Central Bank of India – 18.08
Oriental Bank of Commerce – 16.95
Corporation Bank – 15.92
Bank of India – 15.49
Allahabad Bank – 15.46