RBI removes Central Bank from PCA framework

“The performance of the Central Bank of India, currently under the Prompt Corrective Action Framework (PCAF) of RBI, was reviewed by the Board for Financial Supervision. It was noted that as per the assessed figures of the bank for the year ended March 31, 2022, the bank is not in the breach of the PCA parameters,” the RBI said in a release.

The central bank said that the lender has also provided a written commitment that it would comply with norms on an ongoing basis.

“The bank has provided a written commitment that it would comply with the norms of Minimum Regulatory Capital, Net NPA and Leverage ratio on an ongoing basis and has apprised the RBI of the structural and systemic improvements that it has put in place which would help the bank in continuing to meet these commitments,” the release further said.

The bank’s exit from the PCA restrictions is subject to certain conditions and continuous monitoring, the RBI added.

Central

reported a 14.2 per cent rise in net profit to Rs 234.78 crore in the first quarter ended June this fiscal as compared to Rs 205.58 crore in the same quarter a year ago.

In the latest quarter, the bank’s gross NPA fell to 14.9 per cent of the gross advances as compared to 15.92 per cent in the year-ago period. Net NPAs too declined to 3.93 per cent from 5.09 per cent in the first quarter of the previous year.

Of the three PSU lenders under the RBI’s watch,

and were removed from the framework in September 2021.

The Central Bank of India was put under the PCA framework in June 2017 due to its high net non-performing assets (NPAs) and low Return on Assets.

PCA is triggered when banks breach certain regulatory requirements such as return on asset, minimum capital and quantum of the non-performing assets including on lending, management compensation and directors’ fees.

The bank under PCA faces RBI restrictions on dividend distribution, branch expansion, management compensation or requiring promoters to infuse capital.

Last year, the RBI issued a revised Prompt Corrective Action (PCA) framework for banks to enable supervisory intervention at “appropriate time” and also act as a tool for effective market discipline.

As per the revised guidelines, capital, asset quality and leverage are the key areas for monitoring in the revised framework.