Shares of Allahabad Bank fell as much as 2.6 per cent on Thursday as the Reserve Bank of India has initiated 'prompt corrective action' (PCA) against Allahabad Bank over its high bad loans.
High net non-performing assets (NPA) and a negative return on assets (ROA) for two years in a row have prompted the action, the state-run lender had said in a statement late on Wednesday, although it added the action would help improve its risk management, asset quality and profits.
The central bank has so far ordered corrective action against about 10 lenders, mostly due to their high bad loan ratios. Depending on the risk thresholds set in the Reserve Bank of India corrective action rules, lenders can be asked by the regulator to restrict branch expansion and make higher provisions on sour loans, among other curbs.
Last month, RBI had placed
“This (action) is in view of high net NPA, insufficient CET1 Capital and negative ROA for two consequent years. This action will contribute to the overall improvement in risk management, asset quality, profitability, efficiency, etc of the bank,” BoI had said.
The central bank has also initiated additional actions under Prompt Corrective Action framework for United Bank of India in view of high net non-performing assets, low leverage ratio and the need to raise capital. The actions are based on the assessment of the bank’s position as on March 31, 2017.
Also read:What the RBI’s corrective action on Bank of India means for depositors