UCO Bank Released From RBI’s Prompt Corrective Action Framework

The Reserve Bank of India has freed UCO Bank from its prompt corrective action framework, intended to help weak banks revive.

In a statement, the regulator said that as per UCO Bank's FY21 results, the lender is no longer in breach of the PCA parameters.

The bank has provided a written commitment that it would comply with the norms of minimum regulatory capital, the threshold for net NPA and leverage ratios on an ongoing basis, the RBI said.

The bank has also apprised the RBI of the structural and systemic improvements it has made over the past few years, the regulator said.

UCO Bank was put under the PCA framework in May 2017.

Since then, the bank's performance has improved. Its gross bad loans are still high at 9.37% as of the June 2021 quarter, but sharply lower than nearly 25% two years ago. The net non performing assets ratio is at 3.85% compared to nearly 9% at the end of the June 2019 quarter. UCO Bank's capital adequacy ratio as of June 2021 was at 14.24%.

In January 2018, nearly half of India's government owned banks were under the PCA framework. Since then, most lenders have emerged from it. Indian Overseas Bank is among those that are still under restrictions from the RBI.

In April 2017, the RBI tightened the rules under its ‘Prompt Corrective Action Framework' which aims to rein in lenders whose operational and financial metrics are looking weak. The new framework laid down three risk thresholds based on gross non-performing assets, net NPAs, capital adequacy ratio and return on assets. Once under the framework, restrictions are placed on dividends, branch expansion and, in some cases, lending based on the discretion of the regulator.