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The Reserve Bank of India (RBI) has decided to take UCO Bank out of the prompt corrective action (PCA) restrictions.
This is subject to certain conditions and continuous monitoring.
With this, only two public sector banks – Central Bank of India and Indian Overseas Bank – remain under RBI’s PCA framework.
High NPA and negative ROA
The Kolkata-headquartered public sector bank was put under PCA framework in May 2017 on account of high net non-performing assets and a negative return on assets.
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The RBI, in a statement, said the performance of the UCO Bank currently under the PCA framework of RBI, was reviewed by the Board for Financial Supervision. It was noted that as per its published results for the year ended March 31, 2021, the bank is not in breach of PCA parameters.
“The bank has provided a written commitment that it would comply with the norms of minimum regulatory capital, net NPA, and leverage ratio on an ongoing basis and has apprised the RBI of the structural and systemic improvements it has put in place which would help the bank in continuing to meet these commitments,” the central bank said.
Early intervention
PCA is a structured early intervention and resolution initiated by RBI for banks that become undercapitalised due to poor asset quality or vulnerable due to loss of profitability.
PCA entails restrictions on dividend distribution or remittance of profits, requirement on promoters to bring in more capital, restrictions on branch expansion, higher provisioning requirement, and restrictions on management compensation.
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