The Reserve Bank of India (RBI) has initiated prompt corrective action against Dena Bank in view of high non-performing assets (NPAs), restricting the bank from giving new loans and new hiring.
The public sector bank had on Friday reported widening of its net loss to Rs1,225.42 crore in the March quarter on mounting bad loans and higher provisions to cover them. The net loss stood at Rs575.26 crore in the January-March quarter of 2016-17. Sequentially, the loss widened from Rs380.07 crore in December quarter of 2017-18.
“Reserve Bank of India, vide their letter dated May 31, 2017, has initiated Prompt Corrective Action for Dena Bank and imposed certain restrictions, in view of high Net NPA and negative RoA ( return on assets),” the bank said in a regulatory filing. In continuation to the above, “we wish to inform that the RBI vide their letter dated May 07, 2018 (received by the Bank on May 08, 2018) has restricted the Bank from assuming fresh credit exposure and recruitment of staff,” the central bank added.
Dena Bank said it was put up to the board in its meeting held on 11 May 2018. Bank’s asset quality has worsened with the gross NPAs hitting a high of 22.4% of the gross advances as on 31 March 2018, from 16.27% as of end-March 2017. In value terms, the gross NPAs, or bad loans, rose to Rs16,361.44 crore from Rs12,618.73 crore.
Net NPAs were also up at 11.95% (Rs7,838.78 crore) from 10.66% (Rs7,735.12 crore)
In January, Allahabad Bank had informed about being placed under RBI’s PCA mechanism. The central bank has initiated similar action against other public sector banks, including IDBI Bank Ltd, Indian Overseas Bank and UCO Bank before this.
The banking regulator had in April 2017 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.
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