The RBI has initiated a 'Prompt Corrective Action' against UCO Bank for high bad loans and negative return on assets.
The move will place various restrictions on the public sector lender including on fresh loans and dividend distribution.
"Reserve Bank of India (through a letter dated May 5) has initiated Prompt corrective Action for UCO Bank in view of high net NPA and negative RoA (return on assets)," UCO Bank said in a regulatory filing.
The gross non-performing assets (NPAs) or bad loans of the bank grew to 17.12 per cent of gross advances at the end of 2016-17, from the earlier 15.43 per cent.
Earlier this week, the RBI had initiated a similar action in case of IDBI Bank.
The UCO Bank further said these measures "aim at improving" performance of the bank and strengthening internal controls of the Bank.
"These measures will not adversely impact performance of the bank," it said in the filing.
Earlier, Indian Overseas Bank was put under 'Prompt Corrective Action' (PCA) in 2015.
The Reserve Bank last month 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 UCO Bank declared its financial results for the fourth quarter of 2016-17 today.
The bank's loss narrowed to Rs 588.19 crore during the March quarter as provisions for bad assets fell. Net loss stood at Rs 1,715.15 crore in the same period last year.
The stock of UCO Bank closed 0.24 per cent down at Rs 41.55 on the BSE.
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