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LATEST NEWS UPDATES | Checking NPAs: 11 public sector banks now on RBI watchlist, small firms face credit crunch -Sunny Verma & Sandeep Singh

Checking NPAs: 11 public sector banks now on RBI watchlist, small firms face credit crunch -Sunny Verma & Sandeep Singh

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published Published on Apr 9, 2018   modified Modified on Apr 9, 2018
-The Indian Express

At present, 11 weak PSBs out of the 21 State-owned banks are under the PCA, which kicks in when banks breach regulatory norms on issues such as minimum capital, amount of non-performing assets and return on assets.

Lending to the corporate sector, particularly small and medium enterprises, is becoming increasingly difficult with more than half the country’s public sector banks (PSBs) now under the RBI’s Prompt Corrective Action (PCA) framework, which restricts lending activities of the banks, government sources said.

Government sources also confirmed that at least three-four more banks are expected to be brought under the PCA framework because of deteriorating performance.

“Since the PCA framework restricts the amount of loans banks can extend, this will definitely put pressure on credit being made available to companies especially the MSMEs. Large companies have access to the corporate bond market so they may not be impacted immediately,” a senior banker said.

At present, 11 weak PSBs out of the 21 State-owned banks are under the PCA, which kicks in when banks breach regulatory norms on issues such as minimum capital, amount of non-performing assets and return on assets. The RBI enforces these guidelines to ensure banks do not go bust and follow prompt measures to put their house in order.

In a report last month, rating agency ICRA said that five more banks could be brought under the PCA. These include Canara Bank, Union Bank, Andhra Bank, Punjab National Bank, and Punjab & Sind Bank.

The 11 banks already under the NPA framework are IDBI Bank, Bank of India, UCO Bank, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Dena Bank, Bank of Maharashtra, United Bank of India, Corporation Bank and Allahabad Bank.

Sources said it may take these banks at least another 6-9 months before they report any noticeable improvement in the key regulatory indicators, which will help them come out of PCA.

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The Indian Express, 9 April, 2018, http://indianexpress.com/article/business/banking-and-finance/checking-npas-11-public-sector-banks-now-on-rbi-watchlist-small-firms-face-credit-crunch-5129389/


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