IDBI Bank will Meet RBI to ask for removal of PCA framework

IDBI bank, owned by LIC is currently under prompt corrective action since May 2017 when RBI put restrictions. The bank may hold a meeting with the RBI this week to seek removal of operational restrictions, according to sources.

As per the sources, the bank will give a presentation to the Reserve Bank of India showing its improved financial position. They added that the management is expecting the removal of the PCA framework by the end of this month from bank.

In The RBI had placed IDBI Bank in May 2017, after it was not able to complete the threshold of capital adequacy, asset quality (net NPAs was over 13 per cent in March 2017), return on assets and the leverage ratio.

As the bank is coming under PCA, more than a third of its entire book became dead loans in Q2 of FY18, with the gross NPA ratio touching 32 per cent and the net NPAs at 17.30 per cent.

“The presentation to the RBI will be on the key financial numbers. On the capital front and in terms of net NPAs, we have been able to make progress,” the sources told PTI.

Bank has not yet responded to the query.

If any bank’s net NPA crosses 6 per cent or if CRAR (capital to risk weighted assets) is below the regulatory requirement of 10.88 per cent as of March 2019, it may come under the PCA norms.

In the quarter to September 2019, its net NPA stood at 5.97 per cent and tier-1 capital and CRAR improved to 9.52 per cent and 11.98 per cent, respectively.

One of the spokesperson said, Capital infusion through recap bonds by the government in Q2, and also from LIC, and recovery from stressed accounts have also helped the bank in shoring up its capital position.