RBI puts Dena Bank under prompt corrective action
The Reserve Bank has put Dena Bank under prompt corrective action (PCA), which will place various restrictions on the lender, including on fresh loans and dividend distribution. Earlier, similar action was initiated against IDBI Bank, Indian Overseas Bank and UCO Bank.
“The RBI has initiated ‘prompt corrective action’ for Dena Bank in view of high net NPA and negative ROA (return on asset),” Dena Bank said in a regulatory filing. The bank, however, added that the action will not have any material impact on its performance. The action will “contribute to improve” the internal controls of the bank and improvement in its activities.
Dena Bank’s loss widened to Rs 575.26 crore for the March quarter from Rs 326.28 crore a year earlier as asset quality deteriorated. The bank set aside
Rs 972.04 crore in the quarter to cover bad loans, against Rs 900.94 crore a year ago and Rs 484.43 crore in the preceding quarter. Slippages for the March quarter stood at Rs 2,321 crore, compared with Rs 1,635 crore in the year-ago period.
Net NPA ratio stood at 10.66 per cent from 9.52 per cent in Q3. Gross non-performing assets (NPAs) as a ratio of gross advances were at 16.27 per cent against 14.79 per cent as of December 31.
While tightening the PCA framework last month, the RBI had said regulatory action will be taken against banks which overshoot the limit on NPAs or fail to comply with capital ratios. Action under PCA can include curbs on expansion, exposure and dividend payment. In extreme cases, the PCA framework provides the RBI with powers to force mergers or even wind up non-compliant banks.
On bad loan ratios, the central bank said the first threshold will be triggered if a bank’s net NPA ratio crosses 6 per cent.