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Another nationalized bank is restricted from lending credits. RBI bans the financially troubled Allahabad Bank from lending to save it from collapsing. Let us find out the reason behind this rigorous decision by RBI.
Allahabad Bank Updates
Earlier this week, the renowned Public Sector Bank, Dena Bank had also been barred from lending loan and hiring new staff. The cause of this crisis is the high hitting Non-Performing Assets (NPAs). The increased NPA has weakened the financial base of the banks. To control the troubled status of such banks. RBI bans them from lending by putting under the Prompt Corrective Action (PCA).
What is Prompt Corrective Action (PCA)?
Prompt Corrective Action is the action taken by the RBI (Reserve Bank of India) to help the drowning banks to float.
Check the article below to know in detail about the Prompt Corrective Action (PCA).
If a bank violates the minimum requirements of Capital Adequacy Ratio (CAR), it comes under PCA. And once RBI puts a bank under PCA they are not allowed to make new debtors or distributing dividends and other profits. Although according to the RBI, PCA is the solution to restrain the declining financial condition of these banks, but apparently it is pushing further down. And as expected, the Customers and Market are reacting to this news even before experiencing its impact.
Apart from restricting the bank from lending, Government aims to remove CEO of Allahabad Bank, Usha Anantha-subramaniam in accordance to her involvement in the PNB fraud. The Non-Performing Assets (NPAs) of the
Allahabad has increased from 13.09% to 15.96 % within a year. And recently, Allahabad Bank has reported the net loss of Rs. 3,509.63 crore in the last quarter ended March of 2017-18 due to bad loan system.
The other banks that have been put under Prompt Corrective Action includes Dena Bank, IDBI Bank, Bank of Maharashtra, Oriental Bank of Commerce, Allahabad Bank and UCO Bank, indicating the future of these banks at stake.
Check the latest Dena Bank updates here:
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