With a number of banks such as IDBI Bank, Central Bank of India, Bank of India, Corporation Bank, Allahabad Bank and Dena Bank, already been put under prompt corrective action (PCA) by the Reserve Bank of India for their poor performance with regard to their non-performing assets and failure to curb their net losses, it looks most likely like the cloud is all set to loom over Punjab National Bank, Union Bank of India and Canara Bank as well. As per the guidelines set by the Reserve Bank of India, banks will be put under prompt corrective action (PCA) if they report losses for two consecutive financial years and have non-performing asset percentage more than 6% for two straight financial years.
As per sources, all three banks – Punjab National Bank, Union Bank of India and Canara Bank – are on the brink of joining the PCA fold as PNB reported gross NPAs of 11.2%, Union Bank of India’s NPA percentage stood at 8.4% and Canara Bank’s at 7.5% for Q4 of the 2017-2018 Financial year, which ended on 31 March, 2018.
According to Karthik Srinivasan, senior vice-president and group head, financial sector ratings at ICRA, he said that it’s just about time before all three banks are put under PCA by the Reserve Bank of India for failing to meet both the NPA as well as the net loss parameters. Based the financial report of Punjab National Bank, their CAR has dipped by 9.2% while their NPA for Q4 increased from 12.11% (in Q3) to 18.4% (in Q4), taking their net NPA for the financial year to 11.2% from 7.5% of the previous financial year (2016-2017). At the end of Q4, Canara Bank reported losses of Rs.48.59 billion in just the fourth quarter, taking their total losses for the 2017-2018 Financial year to Rs.42.22 billion – a terrible dip considering that the bank reported a profit of Rs.11.21 billion for the 2016-2017 Financial year. With regard to Union Bank of India, the bank posted their quarterly loss for Q4 standing at a staggering Rs.25.6 billion and a net loss for the Financial year of 2017-2018 of Rs.52.5 billion a year after they reported a net profit of Rs.5.5 billion for the 2016-2017 financial year.
To understand the situation of the banks under the PCA by the Reserve Bank of India, the Department of Financial Services will meet all the banks under RBI restrictions to review their performance and possibly relax some of the restriction place by the Reserve Bank of India on them. A mutual complaint by most banks under the PCA is that their losses have augmented due to RBI’s recent stiff restrictions with regard to loans, mark-to-market losses, etc., a complaint that will be reviewed by the Department of Financial Services.