The Reserve Bank of India (RBI) has taken three banks — Allahabad Bank, Corporation Bank and Dhanlaxmi Bank — out of the Prompt Corrective Action (PCA) framework from the prompt corrective action plan (PCA) for banks with high levels of bad loans and insufficient capital, subject to certain conditions and continuous monitoring.

This means the lending restrictions that they were subject to has been lifted.

According to the RBI, "Of these banks, the Board for Financial Supervision (BFS) noted that Allahabad Bank and Corporation Bank had received Rs 6,896 crore and Rs 9,086 crore respectively. This has shored up their capital funds and also increased their loan loss provision to ensure that the PCA parameters were complied with."

"The two banks have also made the necessary disclosures to the stock exchange that post infusion of capital, the CRAR, CET1, Net NPA and Leverage Ratios are no longer in breach of the PCA thresholds. The banks also apprised RBI of the structural and systemic improvements put in place to maintain these numbers," it said.

Referring to Dhanlaxmi Bank, RBI said the bank is found to be not breaching any of the Risk Thresholds of the PCA Framework, so it has decided to take the bank out of the PCA Framework.

There are still several listed government-owned banks in India that provide about two-thirds of the total loans. With nearly half of them under a PCA plan and the rest cautious due to a record $150 billion in bad debt, the government has been keen the curbs be relaxed to boost their ability to lend.

RBI will continuously monitor the performance of these banks under various parameters, said the release.

With the removal of Allahabad Bank and Corporation Bank, six public sector undertaking (PSU) banks — IDBI Bank, UCO Bank, Central Bank of India, Indian Overseas Bank, Dena Bank and United Bank of India — are still under the PCA framework.

With these under a PCA plan and the rest cautious due to a record $150 billion in bad debt, the government has been keen the curbs be relaxed to boost their ability to lend.

First Published:Feb 26, 2019 6:54 PM IST