Indian Overseas hits 20% upper limit after RBI relaxes PCA curbs

RBI removed the public sector bank from the PCA framework after six years citing improvement in the bank's financial health

Shares of Indian Overseas Bank were locked at the 20 per cent upper circuit at 24.60 in the early morning deals on Thursday after the Reserve Bank of India (RBI) removed the public sector lender from its PCA (Prompt Corrective Action) framework citing improvement in the bank's financial and credit profile.

The stock witnessed massive combined volume of around 51.56 million shares in the first hour of trades on the BSE and NSE. The stock has pared some gains, but is still up 12.2 per cent at Rs 23 on the BSE, while the S&P BSE Sensex is down 10 points at 59,404 at 10:05 am.

RBI said the bank has given commitment to comply with the norms of Minimum Regulatory Capital, Net Non-performing Assets and Leverage ratio on an ongoing basis. It has apprised about the structural and systemic improvements put in place to help the bank to meet these commitments. READ MORE

According to India Ratings, IOB has been meeting the threshold to exit the PCA framework on a quarterly basis in the last four quarters and on an annual basis for FY21.

IOB was placed under PCA in October 2015 on account of high Net-Performing Assets (NPAs) and negative Return on Assets (RoA). It was barred from increasing risk-weighted assets.

For the quarter ended March 2021, the IOB's net NPAs declined to 3.58 per cent from 5.68 per cent in March 2015 (FY15). It posted a net profit of Rs 831 crore in FY21 as against net loss of Rs 454.33 crore in FY15. The ROA was 0.27 per cent for FY21 while it was negative at -0.16 per cent for FY15.

Central Bank of India is the only bank under the RBI's PCA framework as of now. The stock too has zoomed nearly 10 per cent to Rs 23.25 on the BSE.