IDBI Bank hopes to come out of RBI PCA framework this fiscal: MD Sharma

IDBI Bank would endeavour to come out of the RBI's restrictive Prompt Corrective Action (PCA) framework as early as possible during the current fiscal by improving its financial health, a top bank official has said.

The Reserve Bank in May 2017 had placed the IDBI Bank in the PCA framework because of the deterioration in the financial health of the bank.

The PCA framework imposes various operational restrictions on a bank to ensure that the lender remains solvent.

One of the thrust areas of the bank's strategic endeavours has been to expeditiously exit the Prompt Corrective Action (PCA) framework, imposed on it since May 2017, by dint of its performance, IDBI Bank managing director and CEO Rakesh Sharma said in a letter to the shareholders.

"Your Bank is cautiously optimistic of an early exit from the PCA framework in FY2020-21 as it builds on the gains made in FY2019-20 so that your Bank can optimise stakeholder value by undertaking the entire gamut of banking activities," he said in the letter, as per the bank's annual report.

The bank, he said, would work to ensure compliance with all PCA parameters in the coming quarters as it did in the fourth quarter of 2019-20 to provide an enabling platform for "an early exit" from PCA and a return to full-fledged banking activities.

Sharma said as severe delinquency dented the bank's income and profitability in the past, there would be a relentless emphasis on stringent credit standards and pursuit of business in a prudent manner, post the PCA exit so that there is no recurrence of the same in future.

Simultaneously, the bank will focus on robust recovery/ upgrade and close monitoring of portfolio to prevent any slippages in its asset quality.

"As the operating environment for your Bank's lending business is likely to be muted for the most part of the year, there will be a pronounced focus on maximising fee income and reducing the average cost of funds/ deposits," he told shareholders.

Sharma said the bank is committed to becoming a sales-driven organisation so as to deepen and widen the customer relationships.

"Another low-hanging fruit is the LIC synergy where your Bank has invested last year in familiarisation and groundwork. The Bank intends to leverage the benefits of the same this year through a spike in fee income and other synergistic business liaison," he said.

Sharma said the strategic measures adopted by the bank helped it in posting a 26 per cent growth in operating profit to Rs 5,112 crore for 2019-20 as compared to Rs 4,052 crore during 2018-19.

While the bank posted a net loss of Rs 12,887 crore for fiscal 2019-20, it tapered from a net loss of Rs 15,116 crore for 2018-19.

However, the bank has posted a net profit of Rs 135 crore in the fourth quarter of 2019-20, "marking a much-awaited turnaround" from the net loss reported during the last 13 quarters.