RBI initiates 'Prompt Corrective Action' against UCO Bank on high bad loans, negative return on assets
The Reserve Bank of India (RBI) has initiated a 'Prompt Corrective Action' against UCO Bank on account of the bank's increasing bad loans and negative return on assets.
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New NPA norms give more power to RBI to settle bad loans but is it that easy?Due to high bad loans and negative return on assets, the Reserve Bank of India (RBI) has initiated a 'Prompt Corrective Action' against UCO Bank, PTI reported.
The move will place various restrictions on the public sector lender including on fresh loans and dividend distribution, it said.
"Reserve Bank of India (through a letter dated May 5) has initiated Prompt corrective Action for UCO Bank in view of high net non-performing asset (NPA) and negative return on assets (ROAs)," the report said quoting UCO Bank as stating in a regulatory filing.
According to the report, the gross non-performing assets (NPAs) or bad loans of the bank grew to 17.12% of gross advances at the end of 2016-17, from the earlier 15.43%.
Earlier this week, the RBI had initiated a similar action in case of IDBI Bank.
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The UCO Bank further said these measures 'aim at improving' performance of the bank and strengthening internal controls of the bank, cited the report.
"These measures will not adversely impact performance of the bank," it said in the filing.
Earlier, Indian Overseas Bank was put under 'Prompt Corrective Action' (PCA) in 2015, cited the report.
The Reserve Bank last month issued a new set of enabling provisions under the revised PCA framework with a clause that if the bank does not show improvement then it could be either be merged or taken over by other bank.
The UCO Bank declared its financial results for the fourth quarter (Q4) of 2016-17 on May 12, Friday.
The bank's loss narrowed to Rs 588.19 crore during the March quarter as provisions for bad assets fell. Its net loss stood at Rs 1,715.15 crore in the same period last year.
On Friday, the stock of UCO Bank closed down 0.24% or Rs 0.10 at Rs 41.55 on the BSE.
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