PCA: FinMin to review steps taken by banks

Perturbed by the fact that 11 public sector banks, out of 21, are under prompt corrective action (PCA), the finance ministry will hold a first review meeting of these lenders on Thursday.

The ministry will examine what they have done in the last one year to get out of the PCA list that basically restricts their lending operations due to worsening asset quality.

The 11 banks under prompt corrective action are: Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Dena Bank and Bank of Maharashtra. All have been put under PCA by the Reserve Bank of India.

“Banks will not be taken out from PCA as the results have just come out and they are negative. They will give presentation to us on what steps they have taken to improve on their weak areas,” said an official.
The ministry is seeking to know their strategy on moving out of PCA. “We will ask the banks why they are under PCA and which areas they need to improve upon,” the official further added.

“The Q4 results are negative…they would not be taken out of PCA immediately. The banks will give presentation as to what their strategy to come out of this. This is the first meeting after these banks have bee put under PCA a year ago. They would have to tell us which areas they need to improve upon.  This is the first stage and first meeting. After the meeting they will have some idea,” said another official.

Under the PCA, banks face restrictions on distributing dividends and remitting profits. The owner may be asked to infuse capital into the lender. That apart, lenders would also be stopped from expanding their branch networks. It would need to maintain higher provisions and management compensation and directors’ fees would be capped.