Central Bank likely to be out of PCA framework in some three months

State-owned lender may also get capital infusion before the govt sets up privatisation.

Central Bank of India, the last remaining public sector lender under the Reserve Bank of India’s prompt corrective action (PCA) framework, may see such restrictions being lifted in 2-3 months.

Central Bank of India meets all the parameters for exiting the PCA framework and the RBI will remove it from PCA as soon as the end of this fiscal year, said an official. The RBI is examining the bank’s performance, he said.

The PSB was placed under the PCA framework in June 2017 on the back of high soured loan ratio and negative return on assets (RoA). Its non-performing assets (NPAs) were at 10.2 per cent and RoA was minus 0.8 per cent for the year ended March 2017.

The state-owned bank has since then improved its performance. In its annual report for 2020-21, it said it was complying with the PCA framework norms and had prepared an action plan to reduce NPAs and improve profitability.

Its net NPA dropped to 4.51 per cent as of September 2021 from 5.09 per cent in the June quarter. The bank’s capital adequacy ratio also improved to 15.38 per cent in the September quarter compared to 14.88 per cent a quarter ago, and 12.34 per cent a year ago.

The RBI had in November also modified guidelines for PCA that excluded the parameter of RoA that triggers imposing of such restrictions on lenders. Central Bank of India meets all the revised parameters.

Capital infusion

Central Bank of India, Indian Overseas Bank, and UCO Bank may also see the government infusing capital in the last quarter of the ongoing fiscal year, the official quoted above said. This will help these PSBs in meeting regulatory requirements. The Centre has budgeted Rs 20,000 crore for capital infusion in PSBs this fiscal year.

In the last financial year, out of the Rs 20,000 crore infused in five state-owned lenders, Rs 11,500 crore had gone to three banks under the PCA — UCO Bank, Indian Overseas Bank, and Central Bank of India. UCO Bank and IOB were removed from PCA in September.