The Central Bank has removed the Asset Income (ROA) metric from the list of incentives that can place a bank under the ACP.
War Piyush Shukla
The guidelines of the Reserve Bank of India’s revised Immediate Correction Action (PCA) framework will help the Central Bank of India exit from it next year. The Central Bank has removed the Asset Income (ROA) metric from the list of incentives that can place a bank under the ACP.
The RBI, in June 2017, placed the Central Bank of India under the framework of immediate remedial action for the high rate of negative return on assets and bad loans. Currently, it is the only lender facing restrictions on the structure.
According to the revised RBI Circular in the PCA, capital, asset quality and foreign exchange are the parameters to identify lenders who are weak enough to enter the PCA. As on September 30, the Central Bank of India’s Capital Adequacy Ratio (CRAR) rose to 15.38% from 12.34% a year ago, registering an improvement of 304 basis points. Of this, Tier-I ordinary capital was 13.41% and Tier-II capital was 1.97%.
The quality of the lender’s assets improved during the quarter under review, with the gross and net crime rates falling to 15.52% and 4.51% at the end of September, up from 17.36% and 5, 60% a year ago, respectively. .
At the end of September, the foreign exchange rate was 5.15%, up from 3.96% as of September 30, 2020. “We expect the bank to comply with all the revised parameters and to be able to leave the PCA structure. We need to exit the PCA in the current financial year, ”IGRA Finance Gupta Deputy Chairman and Chairman Anil Gupta told Financial Express.
In a statement dated September 30, Icra reaffirmed the A + rating of Tier-II securities from the Central Bank of India for Rs 2,500 crore. After the improvement in the bank’s capital position and credit profile, the outlook for these securities changed from negative to stable, mainly Rs. 4,800 crore capital to the Central Government.
“The ‘sustainable’ outlook affects the bank’s best prospects for exiting the PCA structure and resuming business growth, which will be positive in terms of profitability,” the report said.
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