RBI puts BoI under watch; initiates 'corrective action'

The RBI has initiated a 'prompt corrective action' against Bank of India for mounting bad loans, placing various restrictions on it including issuing of fresh loans and dividend distribution, BoI said today.

In a filing to stock exchanges, BoI said Reserve Bank of India has placed it under Prompt Corrective Action Framework, consequent to the onsite inspection under the risk based supervision model carried out for the year ended March 2017.

"This is in view of high net NPA, insufficient CET1 Capital and negative ROA (return on asset) for two consequent years. This action will contribute to the overall improvement in risk management, asset quality, profitability, efficiency, etc of the bank," BoI said.

At the end of March 2017, the bank's asset quality worsened with gross non performing assets (NPAs) at 13.22 per cent, as against 13.07 per cent in the previous year. Net NPAs, however, improved to 6.90 per cent from 7.79 per cent.

For the second quarter ended September, 2017-18, asset quality improved as gross NPAs declined marginally to 12.62 per cent of gross advances, from 13.45 per cent a year ago.

Net NPAs also improved to 6.47 per cent of net advances for the period under review, down from 7.56 per cent a year ago.

In absolute terms, gross NPAs stood at Rs 49,306.90 crore as on September 2017, from Rs 52,261.95 crore earlier.

The RBI has initiated similar action against other public sector banks including IDBI Bank, Indian Overseas Bank and UCO Bank.

The Reserve Bank in April had 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 over by other bank.

The BoI stock was trading at Rs 174.50, down 3.78 per cent on BSE.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel