New Delhi: State-run Allahabad Bank Monday said the Reserve Bank has imposed restrictions on its lending to risky assets and raising high-cost deposits in view of deteriorating financial health.
The directive has come within days of the RBI imposing similar restrictions on another state-run lender Dena Bank, which is under the Prompt Corrective Action (PCA) of the central bank.
The RBI having regard to the bank’s CRAR and leverage ratio position has advised certain additional actions, Allahabad Bank said in a filing on stock exchanges.
The central bank asked Allahabad Bank, which is already under the PCA mechanism, to restrict expansion of risk weighted average and reduce exposure to un-rated and high-risk advances, the filing said.
Meanwhile, the government Monday said it has initiated action for removal of
Allahabad Bank CEO Usha Ananthasubramanian following the CBI’s first chargesheet in the $ 2 billion fraud at PNB detailing her role.
Action is likely to be taken by the board of Allahabad Bank
against its CEO and MD Ananthasubramanian, who was the managing director of PNB till May 5 last year.
As per the revised PCA guidelines released last year, if a bank enters ‘Risk Threshold 3′, it may be a candidate for amalgamation, reconstruction or even be wound up. Among the many metrics that are used to gauge how weak a lender is are capital, net NPAs, RoA and Tier 1 leverage ratio etc.
Under the PCA, banks face restrictions on distributing dividends and remitting profits. The owner may be asked to infuse capital into the lender. That apart, lenders would also be stopped from expanding their branch networks. It would need to maintain higher provisions and management compensation and directors’ fees would be capped.
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