The Hong Kong Monetary Authority enhanced the supervisory arrangements on the Hong Kong branch of Allahabad Bank. The move comes barely a month after the Reserve Bank of India imposed “certain additional actions” on the bank.

In a regulatory filing to the stock exchanges, the bank said that the decision was based on the assessment of the implications of the bank’s capital position as on March 31, 2018. Allahabad Bank’s capital adequacy ratio stood at 8.69 per cent as on March 31, 2018.

Under the enhanced supervisory arrangements, the bank will be required to maintain high-quality liquid asset in Hong Kong, equivalent to 100 per cent of unpledged deposits.

“The bank should not proactively solicit customer deposits in Hong Kong. However, transactional deposits such as pledged deposits for commercial loans would be excluded from this supervisory arrangement,” the bank filing said.

This apart, the bank should maintain a position of ‘net due to’ its head office, other branches and any direct or indirect subsidiaries and associates. The bank should also not incur additional non-bank credit exposures.

The bank currently has only one overseas branch with a dealing room in Hong Kong. The business of the branch decreased by nearly 9 per cent to ₹12,871 crore as on March 31, 2018, compared to ₹14,130 crore in the same period last year.

The branch had a total deposit of ₹2,762 crore and advances of ₹10,108 crore. It earned an operating profit of ₹91 crore and net profit of ₹45 crore in FY18.

Allahabad Bank was already placed under Prompt Corrective Action (PCA) in January this year. Subsequently, in May, the RBI had advised the bank to restrict expansion of risk-weighted assets, and reduce exposure to non-rated and high-risk advances.

The central bank had also restricted the bank from creation of non-banking assets, and advised it to restrict itself from accessing or renewing wholesale or costly deposits or certificate of deposits.

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