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BoI, UBI under PCA

The Reserve Bank of India has placed two more public sector banks – Bank of India and United Bank of India under the ‘prompt corrective action’ (PCA) framework in view the weakness shown in their balance sheets. Bank of India told the stock exchanges that following an on-site inspection under the Risk Based Supervision Model carried out for year ended March 2017, it has been placed under PCA. The action is in view of high net NPA, insufficient CET1 Capital and negative ROA for two consequent years and this action will contribute to the overall improvement in risk management, asset quality, profitability, efficiency, etc of the bank, the bank said in the notification. As of end-March 2017, the bank had net NPAs of 6.9%, common equity tier (CET) – tier I capital of 7.17%; and return on average assets of -0.24%, it said. But, after this period, there has been improvement in the NNPA position (improvement to 6.47%) and CET-I (7.21%), it added. United Bank of India said in its notification to the stock exchanges that the PCA is in respect of profit retention, capital augmentation, provision coverage, diversification of credit portfolio, rationalization of expansion and cost control. Some of these have already been initiated by the bank. The bank had earlier cross the risk threshold under PCA measures due to a steady rise in stressed assets. Its gross NPAs as a percentage of total loans increased to 18.8% as of end-September 2017 from 16.26% in the same period last year, while net NPAs grew to 11.63% (11.19 per cent). The bank had posted a net loss of Rs 345 crore for the quarter ended 30 September 30, compared with a profit of Rs 44 crore during the same period last year.

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