The Reserve Bank has put four public sector lenders, including IDBI Bank and Indian Overseas Bank, under watch and advised them to stay off risky assets so that their financial health is not stressed further.

Sources said these lenders were on the RBI’s radar as their financial health may not improve after the central bank’s asset quality review (AQR) comes to an end on 31 March.

These banks have been advised by both the finance ministry and the RBI to improve their financials, look for avenues for capital infusion and create a self-sustaining model by selling assets, they added.

RBI had embarked on the AQR exercise from December 2015 and asked banks to recognise some top defaulting accounts as NPAs and provide for them.

The move resulted in a spike in bad assets with lenders recognising over Rs1 lakh crores of bad assets in the December quarter alone.

On a year-on-year basis, the gross NPA of Indian Overseas Bank (IOB) increased by 52% to Rs34,502.13 crore at the end of December 2016, while the loss stood at Rs 554 crore. Similarly, the gross NPA of IDBI Bank spurted by 80% to Rs 35,245 crore and it booked a loss Rs2,255 crore. Kolkata-based UCO Bank’s bottom line too is expected to remain under stress during the fourth quarter ending 31 March. Its gross NPA during the third quarter surged by 49% to Rs2,181.26 crore and the loss was Rs437 crore. IOB was also put under ‘prompt corrective action’ in 2015 when its gross NPA touched 10%.

The RBI has specified certain regulatory trigger points as part of the prompt corrective action (PCA) framework. They include three parameters — capital to risk weighted assets ratio (CRAR), net NPA and Return on Assets (RoA), for initiation of certain structured and discretionary steps.

Courtesy: RBI

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