RBI puts Bank of India under watch; initiates 'corrective action' for mounting bad loans

New Delhi: The RBI has initiated a ‘prompt corrective action’ against Bank of India for mounting bad loans, placing various restrictions on it including issuing of fresh loans and dividend distribution, BoI said on Wednesday.

In a filing to stock exchanges, BoI said Reserve Bank of India has placed it under Prompt Corrective Action Framework, consequent to the onsite inspection under the risk based supervision model carried out for the year ended March 2017.

“This is in view of high net NPA, insufficient CET1 Capital and negative ROA (return on asset) for two consequent years. This action will contribute to the overall improvement in risk management, asset quality, profitability, efficiency, etc of the bank,” BoI said.

At the end of March 2017, the bank’s asset quality worsened with gross non performing assets (NPAs) at 13.22 percent, as against 13.07 percent in the previous year. Net NPAs, however, improved to 6.90 percent from 7.79 percent.

For the second quarter ended September, 2017-18, asset quality improved as gross NPAs declined marginally to 12.62 percent of gross advances, from 13.45 percent a year ago.

Net NPAs also improved to 6.47 percent of net advances for the period under review, down from 7.56 percent a year ago.

In absolute terms, gross NPAs stood at Rs 49,306.90 crore as on September 2017, from Rs 52,261.95 crore earlier.

The RBI has initiated similar action against other public sector banks including IDBI Bank, Indian Overseas Bank and UCO Bank.

The Reserve Bank in April had issued a new set of enabling provisions under the revised PCA framework with a clause that if the bank does not show improvement then it could be either be merged or taken over by other bank.

The BoI stock was trading at Rs 174.50, down 3.78 percent on BSE.