The Reserve Bank has put IDBI Bank under watch by initiating Prompt Corrective Action against it, a move that will place various restrictions on the lender including on fresh loans and dividend distribution.
“This is to inform that RBI (on 5 May) has initiated Prompt Corrective Action for IDBI Bank in view of high net NPA and negative RoA (return on assets),” IDBI bank said in a regulatory filing.
The gross non-performing assets (NPAs) or bad loans of the bank shot up by 80% to Rs35,245 crore and it booked a loss Rs2,255 crore for the December quarter. Its RoA also declined to (-)2.32 at the end of the third quarter of 2016-17.
The statement further said this action will not have any material impact on the performance of the bank and will contribute to improving the internal controls of the bank and improvement in its activities.
Indian Overseas Bank was also put under ‘Prompt Corrective Action’ (PCA) in 2015 when its gross NPAs touched 10%. But the strict condition imposed by RBI was gradually lifted with improvement in its financials.
RBI last month 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 taken be over by other bank.
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