Shock for Allahabad Bank as RBI restricts lending, other activities after PCA action
It needs to be noted that, Allahabad Bank share price tumbled nearly 5% in today's trading session.
State-owned Allahabad Bank informed stock exchanges on Monday that the Reserve Bank of India has put restrictions on its lending and deposits to risky assets. The bank has already been included in RBI's Prompt Corrective Action (PCA) norms. Such restriction comes due to bank's CRAR and leverage position ratio, which is why, RBI has decided to bring in some limitation in Allahabad Bank's operation. It needs to be noted that, the bank's share price has tumbled by nearly 5% in today's trading session.
Here's a list of restrictions implied by RBI on Allahabad Bank.
- To restrict expansion of RW A;
- To reduce exposure to un-rated and high-risk advances;
- To restrict creation of non- Banking assets and;
- To restrict accessing /renewing wholesale/costly deposits/certificate of deposits.
The Board of Directors of the Bank in its meeting dated on May 11, 2018 has already taken note of the same.
Allahabad Bank last week it's fourth quarter ended March 2018 result, where it's saw standalone net loss of Rs 3,509.63 crore widened further on quarter basis due to more than three-time rise in its provisions for bad loans. The bank posted a net profit of Rs 111.16 crore in Q4FY17, whereas net loss of Rs 1,263.79 crore was posted in Q3FY18.
Provisioning rocketed to Rs 5,126 crore in the quarter compared to Rs 1,489.88 crore in the year-ago quarter. Gross NPA peaked to 15.96% of gross advances by end of March 2018 from 13.09% in year ago same period.
As on March 2018, gross bad loans were to the tune of Rs 26,562.79 crore versus Rs 20,687.83 crore in March 2017.
Considering the above factor, RBI decided to bring in PCA framework for the bank.
PCA framework is one such supervisory tool by RBI, which involves monitoring of certain performance indicators of the banks as an early warning exercise and is initiated once such thresholds as relating to capital, asset quality etc. are breached.
On Monday, the share price of Allahabad Bank closed at Rs 44.20 down by 3.18%.