RBI begins 'corrective action' for IDBI Bank over bad loans | Reuters

MUMBAI The Reserve Bank of India (RBI) has initiated "prompt corrective action" for state-run IDBI Bank over its high bad loans and negative return on assets, the lender said on Tuesday.IDBI, in a filing to the stock exchanges, said the action "will not have any material impact" on its performance and expected it to help improve its internal controls and performance.It did not give details of the corrective action.

IDBI is the first lender to come under the RBI central bank curbs after the regulator revised the so-called prompt corrective action framework last month, tightening thresholds around bad loans.India's lenders have been saddled with a record $150 billion of sour loans, triggering a string of measures from the government and the regulator, RBI.

Just last week, the government tweaked rules giving the RBI greater powers to identify and enforce resolutions on specific soured loans.

IDBI, which is almost 74 percent owned by the Indian government, had a net bad loans ratio of 9.61 percent as of December. It has yet to report its results for last quarter.Under RBI rules, prompt corrective action is triggered if a bank's net non-performing assets (NNPA) ratio crosses 6 percent. Lenders with an NNPA ratio of more than 9 percent fall in the "risk threshold 2" category, and can be asked by the regulator to restrict branch expansion and make higher provisions on sour loans among other curbs.IDBI Bank said in February that it expected bad loans to rise in coming quarters and it may have to go slow on new lending to conserve capital, after a stretch of losses. (Reporting by Abhirup Roy and Devidutta Tripathy; editing by Susan Thomas)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date: May 09, 2017 22:45 PM

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