5 Public sector banks are on the verge of being put under Prompt Corrective Action plan by Reserve Bank of India. According a news report in business standard, these banks include Canara Bank, Punjab National Bank, Union Bank of India, Punjab and Sidh Bank and Andhra Bank.
Net NPAs of these banks have risen above 6 per cent during quarter ended December 2017. Andhra Bank, PNB, PSB, UBI and Canara Banks have net NPA at 7.7%, 7.5%, 7.2%, 7.0% and 6.8% respectively.
Prompt Corrective Action plan is triggered on breach of some regulatory requirements such as minimum Capital Adequacy requirement, rise in NPAs and negative return on Assets.
11 out 21 public sector banks have already been put by RBI under PCA.
Under PCA certain restrictions are put on the lenders, such as restriction on lending, taking high cost deposits, entering new lines of business, borrowing from inter-bank market etc. Banks are required to bring down their NPA levels and increase income.
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