IDBI Bank’s shares soared about 17 per cent intra-day on Friday as the Reserve Bank of India (RBI) decided to take the Bank out of the so-called “Prompt Corrective Action”. The Bank’s shares touched an intra-day high and low of ₹44.80 and ₹41.35 a share, respectively. The shares, however, closed at ₹42 apiece, up 9.80 per cent over the previous close on BSE.

RBI had invoked PCA against IDBI Bank in 2017 in view of high non-performing assets and negative return on assets. Under PCA, usually a bank's branch expansion is restricted, and lending is narrowed to relatively less risky segments to nurse it back to health.

Rakesh Sharma, MD & CEO, IDBI Bank, told BusinessLine that: “Our balance sheet size was shrinking. We were not able to grow our corporate advances.We were not able to open branches. Even for small expenditure, we had to take RBI approval. So many restrictions were there. This was hindering the growth of our Bank.”

Sharma emphasised that in the last four years, IDBI Bank worked on its risk management policies, corporate governance and internal house keeping.

Plans calibrated approach

“Now that we are out of PCA, we will be free to do any type of business. We will try to grow our business in a calibrated way so that we avoid any concentration risk, increase the income and improve the efficiency parameters,” said Sharma.

The RBI’s move to take IDBI Bank out of PCA comes in the backdrop of the Union Budget announcement that the Government is working towards strategic disinvestment of 45.48 per cent its stake in IDBI Bank in FY2022.

The Board for Financial Supervision (BFS), which reviewed the performance of IDBI Bank in its meeting held on February 18, 2021, noted that as per the published results for the quarter ending December 31, 2020, the bank is not in breach of the PCA parameters on regulatory capital, Net NPA (non-performing assets) and Leverage ratio.

“The bank has provided a written commitment that it would comply with the norms of minimum regulatory capital, Net NPA and Leverage ratio on an ongoing basis and has apprised the RBI of the structural and systemic improvements that it has put in place which would help the bank in continuing to meet these commitments,” RBI said in a statement.