Central Bank CMD to staff: PCA is a wake-up call for cleansing balance sheet

Being placed under prompt corrective action should be taken as a wake-up call, requiring a do or die effort from each employee for cleansing the balance sheet of bad loans, according to a top Central Bank of India official.

This observation comes in the wake of the Reserve Bank of India putting the public sector bank under prompt corrective action (PCA) in view of high net non-performing assets (NNPAs) and negative return on assets (RoA).

Central Bank of India’s net non-performing assets as a percentage of net advances increased to 10.20 per cent as at March-end 2017 from 7.36 per cent as at March-end 2016. Return on assets was negative in both FY17 (0.80 per cent) and FY16 (0.48 per cent)

With the RBI invoking PCA for Central Bank of India, it will face constraints such as not being able to expand branch network and distribute dividend; restriction on expansion of high risk weighted assets; not being able to incur any capital expenditure other than for technological upgradation and such emergent replacements within board approved limits.

The bank will also have to work towards reducing loan concentration/ exposure in identified (high risk) sectors, industries or borrowers, and unsecured exposures; restrict unrated exposures; improve low-cost current account and savings account (CASA) deposits and avoid high cost deposits; reduce operating expenses and improve cost-to-income ratio.

“This fall from being placed in the category of strong and the best banks to being placed under PCA calls for deep introspection…During the last three decades we have slowly but surely ceded market share purely on account of our inability to keep pace with the changing times.

“The last decade we tried to correct this loss by aggressively growing our book by taking on exposures in bulk disregarding the wisdom of risk dispersion….We are today saddled with mounting NPAs and inadequate capital….,” said Chairman & Managing Director Rajeev Rishi in a candid communication to employees.

Rishi emphasised that NPA management has to be the bank’s top priority. He said if employees are able to achieve cash recovery/ asset upgradation targets and at the same time contain further slippages, the bank will be in a much stronger position by the end of this financial year.

“We certainly cannot afford further slippages. But just merely preventing slippages will not help. We also need to be making cash recoveries/ upgrading assets in order to free provisions already made to strengthen our balance sheet,” he said.

Stating that he has immense faith both in the employees capability and commitment levels, Rishi exhorted employees not to let other matters dilute their efforts towards nursing the bank back to health.

COMMENT NOW