Reserve Bank of India has given big relief to UCO Bank. After four years, RBI has removed the restrictions on UCO Bank, after which this bank is now free to lend. The Reserve Bank had imposed restrictions under the PCA on UCO Bank in May 2017, after which this bank was not free to lend. After this the bank improved its performance, after which the restrictions imposed on it have been removed.
Giving information, the Reserve Bank said that UCO Bank has been taken out of the restrictions of Prompt Corrective Action. These restrictions are imposed on any bank, when it starts giving loans without thinking too much risk.
Prompt Corrective Action Framework – UCO bankhttps://t.co/lTZBehLdN2
— ReserveBankOfIndia (@RBI) September 8, 2021
UCO Bank passes RBI’s probe
RBI said that under the PCA framework, the Board of Financial Supervision reviewed the performance of UCO Bank, which found that the bank was not violating the PCA norms. This review was done on the basis of the performance of the year ended 31 March 2021. The review found that as on March 31, UCO Bank had a net NPA ratio of 3.94%. After this it has been taken out of the restrictions of PCA. This ratio of the bank was 151 basis points higher in the same period last year. The bank’s total capital adequacy ratio under Basel III stood at 13.74%, up 204 bps from the fourth quarter of FY20.
IOB and CBI are still banned
RBI has taken UCO Bank out of the PCA framework due to its poor performance, but two Indian banks are still under the ambit of PCA. The performance of Indian Overseas Bank and Central Bank of India is currently not in line with the parameters of PCA. Because of this, restrictions are still imposed on these banks. Through the PCA framework, the Reserve Bank puts restrictions on banks that violate certain regulatory norms in terms of bad loans and capital adequacy. PCA prevents banks from giving high-risk loans, sets aside excess capital on provisioning and also restricts management salaries.
We are ending restrictions on banks: Das
RBI Governor Shaktikanta Das says that he is ending the restrictions on banks. He said on 6 August that he was taking banks out of the restrictive framework on the basis of assessment. Recently, we have taken a public sector bank out of the restrictions of PCA and we analyze it whenever necessary requests are received.