Govt asks 11 weak PSBs to submit turnaround plan by Friday

The government on Tuesday asked 11 PSU banks, including Allahabad Bank, Dena Bank and Bank of India, to submit their turnaround plan by Friday.

These banks have been placed under the Reserve Bank of India lens for Prompt Corrective Action (PCA) of their financial health.

The 11 banks under PCA are Dena Bank, Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce and Bank of Maharashtra.

The government on Tuesday asked 11 PSU banks, including Allahabad Bank, Dena Bank and Bank of India, to submit their turnaround plan by Friday.

These banks have been placed under the Reserve Bank of India lens for Prompt Corrective Action (PCA) of their financial health.

Putting under PCA restricts their lending activities, debars them from opening new branches, staff recruitment and increasing the size of their loan book.

These banks are looking at consolidating their operations and branch expansion plans.

According to sources, the Centre may even allocate more funds to these banks laden with huge bad loans. Finance Minister Piyush Goyal had last week promised “every possible support” to strengthen their resolve to come out of the “current situation as quickly as possible”.

After a Rs 13,700 crore loan fraud in February, even the Punjab National Bank stares at being included in the PCA framework. The problems of PNB appear to be increasing after global rating agency Moody's investors service downgraded the second largest state-owned lender to junk status citing the impact of Nirav Modi scam on it.

The Centre had recently allocated Rs 52,311 crore to 11 weak banks to maintain their minimum capital requirement. Apart from this, the Centre also infused Rs 35,828 crore in nine strong banks.

This was a part of Rs 2.11 lakh crore allocation promised by the Centre last year to help public sector banks deal with their bad loans in the next two years.

The government is also readying itself for a second tranche of recapitalisation bonds for the state-owned banks. However, an official said that the government may address the recapitalisation needs of banks under PCA immediately as the second tranche of recap bonds may not be sufficient for them.

Apart from PNB, four other lenders who could be brought under the PCA are Andhra Bank, Canara Bank, Union Bank and Punjab and Sind Bank.