Finance ministry to conduct performance review of heads of 12 banks

Illustration: Ajay Mohanty
The finance ministry would soon initiate a performance review of heads of public sector banks that are under the RBI's Prompt Corrective Action (PCA) as part of the reform process, official sources said.

So far, the Reserve Bank has put 12 public sector banks (PSBs) under watch in view of lagging on certain performance parameters like unexpected level of high non-performing assets (NPAs), low capital level, low return on assets etc.

These parameters indicate weak financial health of lending institutions and a need to initiate remedial measures to put them on a right course.

Performance review of the top level management of all such banks would be undertaken soon, official sources said.

As far as capital is concerned, the government has committed adequate funds, they said, adding that now these banks have to prove their mettle on the NPA front.

If these lenders "perform extraordinarily", they will be rewarded, sources added.

In the recently announced Reforms Agenda for Responsive & Responsible PSBs, the government committed Rs 523.11 billion for the 12 banks under PCA as against healthy banks which will be Rs 358.28 billion crore by March 31, 2018.

During the current fiscal, IDBI Bank has been committed the highest infusion of Rs 106.10 billion, followed by Bank of India, Rs 92.32 billion and UCO Bank (Rs 65.07 billion).

Among other PCA lenders Central Bank of India was committed Rs 51.58 billion, Indian Overseas Bank - Rs 4694 billion; Oriental Bank of Commerce Rs 35.71 billion; Dena Bank - Rs 30.45 billion; Bank of Maharashtra - Rs 31.73 billion; United Bank of India - Rs 26.34 billion; Corporation Ban Rs 21.87 billion and Allahabad Bank - Rs 15 billion by the end of 2017-18.

Following the revision of the PCA guidelines in April 2017, the RBI first placed IDBI Bank under the watch. The series continued till earlier this month when it placed Allahabad Bank, the last in the series, under PCA.

Last year, RBI said that capital, asset quality and profitability would be the basis of the PCA framework on which the banks would be monitored and has defined three kinds of risk thresholds.

In a notification issued by RBI that time, the mandatory action that would be taken when a bank breaches the risk threshold includes restriction on dividend payment/remittance of profits, restriction on branch expansion, higher provisions, restriction on management compensation and director's fees.

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