With focus on recovery, Oriental Bank of Commerce (OBC) expects to post profit and also come out of prompt corrective action (PCA) framework of the RBI later this fiscal.
With focus on recovery, Oriental Bank of Commerce (OBC) expects to post profit and also come out of prompt corrective action (PCA) framework of the RBI later this fiscal. “With the resolution under Insolvency and Bankruptcy Code gathering momentum, we expect reduction in non-performing assets and add to the bottomline,” OBC Managing Director M K Jain told PTI. Out of resolution of Bhushan Steel resolution alone, OBC will get Rs 400 crore besides reduction of non-performing assets (NPA).
Last month, Bamnipal Steel (BNPL), a wholly-owned subsidiary of Tata Steel, successfully completed the acquisition of controlling stake of 72.65 per cent in Bhushan Steel (BSL). Settlement of the amounts equivalent to Rs 35,200 crore towards financial creditors of BSL was initiated as per the terms of the resolution plan and corresponding transaction documents. The bank hopes to make profit in the next few quarters that will help it to come out of PCA framework, he said.
OBC is one of the 11 banks which are under the PCA framework. Other banks which are part of the RBI’s watchlist are Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Dena Bank and Bank of Maharashtra. Together, these banks accounted for Rs 52,311 crore of the Rs 88,139-crore capital infusion plan (through bonds and budgetary support) announced by the government for 2017-18.
As per the revised PCA guidelines released last year, if a bank enters ‘Risk Threshold 3′, it may be a candidate for amalgamation, reconstruction or even be wound up. Among the many metrics that are used to gauge how weak a lender is are capital, net NPAs, RoA and Tier 1 leverage ratio etc.
Under the PCA, banks face restrictions on distributing dividends and remitting profits. The owner may be asked to infuse capital into the lender. That apart, lenders will also be stopped from expanding their branch networks. It would need to maintain higher provisions and management compensation and directors’ fees will be capped.