The Reserve Bank of India has put 11 Public Sector Banks under the Prompt Corrective Action (PCA) scheme over the issue of Non-performing Assets. Eleven “weak banks” were supported with a capital of Rs. 52,311 crore from the government a few months ago. This step was taken with an aim to help these banks cope up with their minimum capital demand. Not only that, there were other potential banks too which were aided with a capital of RS. 35,828.
Earlier in April 2017, RBI had tightened the PCA guidelines to improve the weak lending sector. Since the benchmarks set for risk under those PCA rules are very high, banks are not able to increase their recruitments and spread new branches. The major impact is on the size of their loan books which they cannot expand following the stringent PCA framework. Banks, under the PCA rules, are allowed to lend to only those firms which have a high credit rating.
Bank of India, Dena Bank, IDBI Bank, Allahabad Bank, Oriental Bank of Commerce, UCO Bank, United Bank of India, Indian Overseas Bank, Corporation Bank, Central Bank of India and Bank of Maharashtra – these are the 11 banks that have come under the RBI’s radar. There are five more banks which could be added to the list. Those are Canara Bank, Andhra Bank, Punjab & Sind Bank, Punjab National bank and Union Bank.