Curbs on Allahabad Bank, CEO divested of powers
Ananthasubramanian has been named in a CBI charge-sheet in connection with the alleged Rs 13,500 crore fraud at the Punjab National Bank
Reserve Bank of India has imposed restrictions on Allahabad Bank on lending to risky assets and raising high-cost deposits in view of deteriorating financial health even as finance ministry has asked the lender to take away all the powers of its CEO and MD Usha Ananthasubramanian.
Ananthasubramanian has been named in a Central Bureau of Investigation (CBI) charge-sheet in connection with the alleged Rs 13,500 crore fraud at the Punjab National Bank. Ananthasubramanian was earlier heading the PNB.
In a stock exchange filing, Allahabad Bank said it has convened a meeting of the Board of Directors on May 15 to discuss the matter, adding that it has not received any "formal communication" from the ministry.
The finance ministry has also asked the PNB board to divest two executive directors of all powers, financial services secretary Rajiv Kumar told reporters.
The RBI having regard to the bank's CRAR and leverage ratio position has advised certain additional actions, Allahabad Bank said in a filing on stock exchanges.
The central bank asked Allahabad Bank, which is already under the PCA mechanism, to restrict expansion of risk weighted average and reduce exposure to un-rated and high-risk advances, the filing said.
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 would also be stopped from expanding their branch networks. It would need to maintain higher provisions and management compensation and directors' fees would be capped.
Allahabad Bank is the second lender among the 11 banks that has been restricted by the RBI from lending to risky assets.
(With agency inputs)