Want Restrictions To Be Lifted? Improve On Seven Parameters Under PCA Framework, FinMin Tells Troubled Banks

Six public sector banks which are still facing restrictions under the Prompt Corrective Action (PCA) have been asked by the Finance Ministry to better their performance on seven parameters in order to get the government’s approval to be taken out of the PCA list, reports The Economic Times.

“We have told these banks to improve upon net interest margins (NIMs), CASA (current account savings account), RWA (Risk Weighted Assets), NPA recognisation, divergence (disparity in loan recognisation), operating profit and non-core asset selling to be able to get our support for being out of the PCA,” an official stated.

Recently, it was reported that these banks were expected to be removed from the PCA framework over the next two quarters.

The government had imposed PCA on 11 banks last year, but three of them have already been taken out and another two are being merged with a better-functioning entity. The government’s recent recapitalisation drive had helped in reducing the number of banks in the list, helping them reach the target Common Equity Tier 1 (CET1) capital level of 7 per cent.

The Banks remaining within the PCA framework now are Allahabad Bank, United Bank of India, Corporation Bank, UCO Bank, Central Bank of India and Indian Overseas Bank.

The PCA put restrictions on the ability of banks covered by it to pay out dividends or remit profits. Banks also cannot expand branches and limits are imposed on the compensation of executives.