RBI Puts 4 Public Sector Banks Under Watch On Asset Quality Concerns
Financial health of these lenders may not improve after RBI’s asset quality review ends on March 31.
The Reserve Bank of India (RBI) has put four public sector lenders, including IDBI Bank and Indian Overseas Bank (IOB), under watch and advised them to stay off risky assets so that their financial health is not stressed further.
While UCO Bank also figures in the list, the name of the fourth lender could not be immediately ascertained. These lenders were on the RBI's radar as their financial health may not improve after the central bank's asset quality review (AQR) comes to an end on March 31, people familiar with the development said.
These banks have been advised by both the finance ministry and the RBI to improve their financials, look for avenues for capital infusion and create a self-sustaining model by selling assets, they added. Queries sent to the RBI did not elicit any response, while no comments were available from the four lenders.
RBI had embarked on the AQR exercise from December 2015 and asked banks to recognise some top defaulting accounts as non-performing assets (NPAs) and provide for them. The move resulted in a spike in bad assets with lenders recognising over Rs 1 lakh crore of bad assets in the December quarter alone.
On a year-on-year basis, the gross NPA of IOB rose 52 percent to Rs 34,502 crore at the end of December 2016, while the loss stood at Rs 554 crore. Similarly, the gross NPA of IDBI Bank surged 80 percent to Rs 35,245 crore and it booked a loss Rs 2,255 crore.
The government recently shifted IDBI Bank's Managing Director and Chief Executive Officer Kishor Kharat to Indian Bank. MK Jain, MD and CEO of Indian Bank, was in turn moved to IDBI Bank. Kolkata-based UCO Bank's bottomline too is expected to remain under stress during the fourth quarter ending March 31. Its gross NPA during the third quarter surged 49 percent to Rs 2,181.3 crore and the loss was Rs 437 crore.
IOB was also put under 'prompt corrective action' in 2015 when its gross NPA touched 10 percent.
The RBI has specified certain regulatory trigger points as part of the prompt corrective action (PCA) framework. They include three parameters – capital to risk weighted assets ratio (CRAR), net NPA and Return on Assets (RoA) – for initiation of certain structured and discretionary steps.