RBI lifts lending curbs on IOB after six years

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The Reserve Bank of India on Wednesday, said that Indian Overseas Bank (IOB) will no longer be subjected to strict lending curbs as the state-owned bank has provided a written commitment that it would comply with the minimum regulatory capital norms, net non-performing assets (NPA) and leverage ratio on an ongoing basis. The central bank had put IOB under the Prompt Corrective Action (PCA) restrictions back in October 2015.

IOB has also appreciated the structural and systemic improvements put in place by the RBI, which would help them in continuing these commitments. Following its exit, only Central Bank of India is under PCA.

To rein banks that have breached the regulatory thresholds in bad loans and capital adequacy, the RBI uses the PCA framework. It comprises of curbs on high risk lending, setting aside more money on provisions and restrictions on management salary.

RBI to take out banks from PCA after assessments

The RBI said that IOB’s performance is currently under the PCA framework and was reviewed by the board for financial supervision. And, as per the results published as of 31 March 2021, the bank was not found to be in breach of the parameters of the PCA.

Back on August 6, RBI governor ShaktiKanta Das said that the banks have been taken out of the PCA framework based on assessments.

IOB’s net NPA ratio stood at 3.58%, and was lower by 186 basis points as compared to the same period last year. While the total capital adequacy ratio under Basel 3 was at 15.32% and increased by 460 basis points from the fourth quarter of FY 20. The data is as on 31 March 2021.