RBI Orders Dena Bank To Stop Lending
The central bank has put Dena Bank under its prompt corrective action framework.
The Reserve Bank of India has ordered Dena Bank Ltd. not to issue any fresh loans and hire any new personnel.
The public sector lender yesterday reported a further widening of its loss to Rs 1,225.4 crore in the March-ended quarter due to mounting bad loans and higher provisioning. Net loss stood at Rs 575.2 crore in the year-ago period. In the previous quarter, the loss was at Rs 380.1 crore.
The RBI, had last year, vide their letter dated May 31, 2017, initiated Prompt Corrective Action for Dena Bank and imposed certain restrictions on the bank, in view of high bad loans and negative return on assets. “In continuation to the above, we wish to inform that the RBI vide their May 7, 2018 letter (received by the Bank on May 8) has restricted the bank from assuming fresh credit exposure and recruitment of staff,” the state-owned lender said in an exchange filing today.
The bank’s asset quality has worsened with the gross NPAs hitting a high of 22.4 percent of the gross advances as on March 31, from 16.27 percent last year. In value terms, the gross bad loans rose to Rs 16,361.4 crore. Net NPA ratio was also up to 11.95 percent from 10.66 percent year-on-year.
Earlier in January this year, Allahabad Bank had informed exchanges about being placed under the RBI’s PCA mechanism.
The RBI has initiated similar action against other public sector banks, including IDBI Bank Ltd., Indian Overseas Bank and UCO Bank before this.
The RBI in April 2017 had issued a new set of enabling provisions under the revised PCA framework with a clause that if the bank does not show improvement then it could be either be merged or be taken over by other bank.