New Delhi : The government along with the RBI are soon expected to work out some relaxations in the central bank's Prompt Corrective Action (PCA) framework for banks struggling with huge accumulated non-performing assets (NPAs or bad loans), a senior official said on Monday.
Currently, 11 banks with high bad debts are under the Reserve Bank of India's (RBI) PCA framework that prohibits them from further lending and the official said that the relaxation will be available only to those lenders that have shown substantial improvement in dealing with bad loans.
With the aid of the relaxations, some of the banks with improved performance may be able to exit the PCA framework as early as next month, he added.
The official pointed to the recapitalisation undertaken last month of state-run banks, ten of whom are under the PCA framework and said some banks have shown improvement both on recoveries as well as on de-risking their portfolios.
The government last month obtained parliamentary sanction for issuing additional recapitalisation bonds of Rs 41,000 crore.
Tabling the supplementary demand for grants in this regard in the Lok Sabha last month, Finance Minister Arun Jaitley said the government will infuse Rs 83,000 crore in public sector banks (PSBs) in the remaining part of the fiscal taking the total recapitalisation of banks during the year to Rs 1.06 lakh crore.
Following this, Jaitley had told reporters here that he expected a few PSBs to exit the PCA framework.
"Providing capital to better performing PCA banks to achieve 9 per cent capital to risk weighted asset ratio; 1.875 per cent Capital Conservation Buffer and the six per cent net NPA threshold, facilitating them to come out of PCA," Jaitley said.
Financial Services Secretary Rajeev Kumar told reporters here last month that the capital infusion will help at least four banks meet their regulatory capital norms.
"We have made provisions to give capital to 4-5 banks depending on performance and on the Q2 and Q3 results. The figures will be decided later but there are chances that we equip at least 3 to 5 banks to meet the norms," he said.
"The NPAs recognition is complete, recapitalisation is in full swing, it has been enhanced further, recovery is also in full swing, the last H1 (April-September 2018) recovery is to the tune of Rs 60,726 crore," he had added.
Addressing an investors roundtable at the Vibrant Gujarat Summit in Gandhinagar last week, new RBI Governor Shaktikanta Das said that after reaching a peak of 11.5 per cent in March 2018, the gross NPAs ratio of Banks improved to 10.8 per cent in September 2018.
"As per the current assessment of the Reserve Bank, the ratio may further improve to 10.3 per cent by March 2019," he added.