One bank may come out of PCA this week, Other two in feb

Bank of India has submitted proofs of improvement in parameters.

Close on the heels of recapitalisation, Bank of India, which received the highest infusion of Rs 10,086 crore last month, has submitted details of its three key parametres—net NPA, return on assets (RoA) and capital to risk weighted assets ratio (CRAR)—to the RBI to consider its performance to take the lender out of the PCA list.

Official sources said Bank of India (BoI) has submitted proofs of improvements in its three Prompt Corrective Action triggers to the Reserve Bank and now this would be placed before the RBI’s Board for Financial Supervision (BFS) meeting, expected in a day or two. In all probability, BoI would be out of the PCA framework this week. Sources also added Bank of Maharashtra (BoM) and Oriental Bank of Commerce (OBC) are also likely to approach the RBI on PCA triggers’ improvements later this week. As things stand, they also have a fair chance of coming out of the PCA framework this fiscal, even as early as February.

Once these three banks come out of PCA, lending by them can be expected to go up by at least 20-25 per cent, said a former bank chairman.

A banking source said BoI shareholders have through the employee stock purchase scheme (ESPS) made a capital infusion of Rs 845 crore, which has been added to the capital base of the bank and that has taken care of all the gaps in its capital shortfalls after counting the recapitalisation by the finance ministry.

Many public sector banks, including Allahabad Bank, Union Bank of India, United Bank of India, Canara Bank and Punjab National Bank, have availed of ESPS to raise funds by issuing shares to their own staff. The government, in March 2017, had allowed public sector banks to offer stock options to their employees, aimed at retaining experienced hands and as a means for raising capital. Syndicate Bank had raised Rs 500 crore through ESPS by allotting 30 crore new shares to its staff. Punjab National Bank mobilised Rs 500 crore through ESPS by issuing 10 crore shares to its employees.