Six more public sector banks could come under PCA

Six more state-run banks could be placed under Reserve Bank of India(RBI)'s prompt corrective action (PCA) framework, as per a report in The Economic Times.

Punjab National Bank, Union Bank of India and Syndicate Bank are some of the banks at risk of being placed under the PCA framework by the RBI, the report said.

The central bank has already placed 11 state-run banks under its corrective action plan, which include Allahabad Bank and Dena Bank. Placing the lenders under PCA could lower the chances of the finance ministry selling the good loans of weak banks to stronger lenders, the report added.

But the RBI could provide some relief to the lenders, since they are not lagging behind in all indicator, a source told the paper. "If the lenders don't come under PCA, there is a chance the plan to sell healthy loans may work," a senior finance ministry official told the paper.

The idea to establish a consortium of banks that would take over the good loans from the weak lenders would not work out, the report added.

"It also does not make sense for these banks to take over these loans if there are lending restrictions," the official told the paper. The PCA framework places a number restrictions on lenders, which include curbing ability to issue fresh loans, halting dividend distribution, and stopping branch expansion.