Finance ministry to review 11 stressed PSBs today

The finance ministry will hold a meeting with 11 weak state-run banks today to review their plans to come out of Reserve Bank of India’s prompt corrective action (PCA) framework.

Eleven banks— Dena Bank, Central Bank of India, Bank of Maharashtra, IDBI Bank, UCO Bank, Oriental Bank of Commerce, Indian Overseas Bank, Corporation Bank, Bank of India, Allahabad Bank and United Bank of India— have been placed under the PCA, a mechanism put in place by the central bank to prevent them from going bust. More banks are likely to come under it.

The PCA action is initiated against the banks which have high net non-performing assets (NPAs) and negative return on assets (RoA) for two consecutive years.

This is the first meeting after the RBI put curbs on the public sector banks. “We will ask them about their strategy to come out of the PCA,” said a senior official at the finance ministry. These stressed banks are unlikely to be taken out of the PCA any time soon, as their results are in negative.

The meeting, to be chaired by the financial services secretary Rajiv Kumar, will also discuss areas on which the banks need to improve and the compliance status of the government’s reforms agenda, sources said.

“We will ask them about the status of the implementation of the Enhanced Access and Service Excellence (EASE) reform agenda,” said the official, adding that this is the first meeting after the reform plan was announced. “We will get some feedback and will have an idea about how to move ahead,” according to another official.

In January, the Department of Financial Services (DFS) under the finance ministry had directed the public sector banks to implement its banking reforms agenda to come out of the bad loan situation and improve their financial health.

The ministry is in the process of implementing an independent agency to evaluate banks on the EASE parameters.

The EASE roadmap for the PSBs includes steps to improve customer experience, credit off take and responsible banking. The banks have also been asked to set up a stressed asset management vertical, tie-up with agencies for a follow up on loans above Rs 250 crore, sell non-core assets and follow a minimum threshold of 10% for participating in consortium loans. The various targets under the EASE plan have to be completed in a period ranging from a couple of months to four years.