RBI removes Indian Overseas Bank from PCA framework

The Reserve Bank of India (RBI) on Wednesday removed Indian Overseas Bank from its prompt corrective action (PCA) framework, subject to certain conditions and continuous monitoring. This means the bank will no longer face strict lending restrictions that were put in place by the the RBI.

The RBI said its Board for Financial Supervision reviewed the performance of Indian Overseas Bank, and as per the published results of the bank for the year ended March 31, 2021, it is not in the breach of the PCA parameters.

"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 central bank said in a release.

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Taking all this into consideration, the RBI said it has been decided that Indian Overseas Bank be taken out of the PCA restrictions subject to certain conditions and continuous monitoring.

The PCA framework is triggered when banks breach certain thresholds on return on asset, minimum capital and quantum of non-performing assets. The restrictions disable banks in several ways to lend freely and force them to operate under a restrictive environment that turns out to be a hurdle to growth.

Earlier this month, RBI had also removed UCO Bank from the PCA framework.

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