RBI removes Central Bank of India from Prompt Corrective Action framework

The Reserve Bank of India (RBI) on Tuesday removed Central Bank of India from its Prompt Corrective Action Framework (PCAF) after the lender showed improvement in various financial ratios, including minimum regulatory capital and net non-performing assets (NNPAs).

The PCA norm is a supervisory tool and is imposed when a bank breaches certain regulatory thresholds on capital to risk weighted assets ratio (CRAR), net NPAs and return on assets (RoA).

The RBI had imposed the PCA norms on the bank in June 2017 due to its high net NPA and negative return of assets (RoA).

After reviewing the performance of the Central Bank of India, RBI decided to remove the restrictions on the bank.

“It was noted that as per the assessed figures of the bank for the year ended March 31, 2022, the bank is not in the breach of the PCA parameters,” RBI said in a release on Tuesday.

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.

In the financial year ended March 2022, the bank’s net NPA ratio stood at 3.97 per cent as compared to 10.20 per cent in the fiscal ended March 2017. In the quarter ended June 2022, its net NPA improved to 3.93 per cent.

During the fiscal ended March 31, 2021, its CRAR improved from 13.84 per cent compared to 10.95 per cent as on March 31, 2017. In June 2022, CRAR stood at 13.33 per cent.

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This is the last bank which has been removed from the PCA norms by the RBI.

RBI had placed 11 state-run banks – Allahabad Bank, United Bank, 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 – under PCA framework after they breached the risk thresholds.

Of the 11 lenders, five PSBs were placed under PCA restrictions in the quarter ended June 2017; another five in the quarter ended December 2017 and one PSB in the quarter ended March 2018.

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