Dena Bank tanks 12.5% as RBI initiates prompt corrective action

RBI initiates prompt corrective action against Dena Bank due to mounting NPAs

Dena Bank tanks 12.5% as RBI initiates prompt corrective action

State-run Allahabad Bank on Monday said that the Reserve Bank of India has advised certain addition actions against the lender in view of its capital adequacy and leverage ratio position, after the apex bank had imposed prompt corrective action (PCA) on it. Such restriction comes due to bank's CRAR and leverage position ratio, which is why, RBI has made a decision to bring in some limitation in Allahabad Bank's operation. This means that besides not expanding loans, the bank is barred from making any fresh capital investments. tnn Last week, the RBI had placed similar restrictions on Dena Bank.

Provisions for bad loans dropped 3.7 percent sequentially (down 10 percent year-on-year) to Rs 148.6 crore in fourth quarter of financial year 2017-18.

Provisioning rocketed to Rs 5,126 crore in the quarter compared to Rs 1,489.88 crore in the year-ago quarter. Rival Canara Bank reported a net loss of Rs 4,859 crore in January-March, versus a profit of Rs 214 crore and another state-owned lender Allahabad Bank also reported a net loss of Rs 3,509 crore versus Rs 111 crore year-ago profit.

After opening weak at Rs 18.30 against the previous close of Rs 18.45, the stock touched an intraday high of Rs 18.30 and a low of Rs 16.15 on the BSE.

The bank has already been included in RBI's Prompt Corrective Action (PCA) norms.

According to a Business Standard report, the credit and financial profiles of Bank of Maharashtra, Oriental Bank of Commerce, Allahabad Bank and UCO Bank are in bad shape - all these are under PCA.

"We are all expecting the economy to do better this year, investment to pick up, there are some signs that corporate results are getting better.In such a case, suddenly if you say, banks are not able to lend, it could strike us quite hard", said Sabnavis. Banks are placed under PCA when they are unable to maintain minimum requirements of auto, the bank's net non-performing assets (NPAs) moves above 6 per cent or its return on assets (RoA) is negative for two years.

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