The Reserve Bank of India took public sector lender Indian Overseas Bank (IOB) out of the Rapid Corrective Action Framework (PCA) (PCA) on Wednesday due to improving its financial and credit profile. The move gives the Chennai-based lender more freedom to lend, especially to businesses and grow the network, subject to prescribed standards.
IOB was placed under PCA in October 2015 due to Net Performing Assets (NPA) and negative Return on Assets (RoA). It was prohibited from increasing risk-weighted assets.
In March 2021, its net NPA fell to 3.58% from 5.68% in March 2015 (FY15). He posted a net profit of Rs 831 crore in FY21 against a net loss of Rs 454.33 crore in FY15. The ROA was 0.27% for FY21 while it was negative at -0.16% for FY15.
The IOB share closed up 0.74% at Rs 20.5 per share on BSE.
Kolkata-based UCO Bank left the PCA framework earlier this month. Today, only the Indian Central Bank based in Mumbai remains under the CPA regime.
RBI, in a statement, said its financial supervisory board has reviewed the performance of IOB. The bank is not in violation of the PCA parameters according to its published results for the fiscal year ended March 31, 2021, RBI said.
As part of the PCA, the RBI imposes certain trade restrictions on banks with weak financial indicators. The nature and degree of restrictions are based on thresholds and depend on the financial profile of each bank.
According to India Ratings, IOB has met the PCA exit threshold on a quarterly basis for the past four quarters and on an annual basis for fiscal 21.
RBI said the bank is committed to meeting standards for minimum regulatory capital, non-performing net assets and leverage ratio on an ongoing basis. It took note of the structural and systemic improvements put in place to help the bank meet these commitments.
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