MUMBAI: The Reserve Bank of India has placed restrictions on the Pune-headquartered Bank of Maharashtra by placing it under a Prompt Corrective Action (PCA) scheme. With this, the total number of banks placed under RBI‘s watch has gone up to six.
Bank of Maharashtra on Saturday informed the stock exchanges that it has been told by RBI that it has been placed under PCA in view of high level of bad loans.
According to the bank, the RBI action will not have any material impact on the performance of the bank and will contribute towards improving internal controls.
Earlier, the RBI had placed Central Bank of India, Dena Bank, IDBI Bank, Indian Overseas Bank and UCO Bank under PCA in view of their mounting non-performing assets (NPAs).
PCA is a scheme where, in order to prevent the financial health of a bank from deteriorating, the RBI places restrictions on dividends and requires the owners to bring in more capital. If things do not improve over a period of time and the financial health deteriorates, the scheme provides for the RBI to nudge the bank concerned into a merger.
Central Bank of India’s ratio of gross NPAs to total loans rose to 17.81% as of March 2017. In absolute terms, the gross NPAs amounted to Rs 27,251 crore, prompting the RBI to impose PCA.