Some 11 PSU banks are already under the close watch of the RBI because of their poor financial health. 9 out of 11 of these have already submitted their two-year recovery plan to the government which includes the stake sale in the subsidiaries and reduction of the corporate loan book.

The 11 banks that are already under the Prompt Corrective Action (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 the Bank of Maharashtra.

Now as per the latest news, it is possible that the stressed banks like PNB and Andhra Bank also join the list of the PCA. They may soon become a part of Reserve bank of India’s prompt corrective action (PCA) framework. Under the PCA they will have to follow stringent norms and rules for the lenders to meet regulatory capital requirements. Under the PCA, the banks have restrictions like distributing dividends and remitting profits. Also, the lenders are not allowed to diverse their branch networks and they are expected to maintain higher provisions. Under the PCA rule, the management compensation and director fees are also capped.

11 out of the 21 PSU banks are now under the PCA. Since PNB and Andhra bank have net non-performing assets of nearly 8% and common equity tier (CET) levels at 6%, it is possible that these two banks will be soon included in the PCA framework. Also, if the lenders are included in the PCA, the loan share that falls under the PCA framework, will rise to 26% as compared to the current 19% figure.

In one of the statements issued by the brokerage, it was said, “PSU banks under PCA have seen loans contract YoY, while non-PCA PSU banks have seen a 10 per cent YoY growth in loans. With RBI putting sanctions on further loan growth for Dena and Allahabad, loan growth for PCA banks is likely to contract further.”

PNB has been going under the losses and as per the reported figure, Punjab National Bank has suffered a net loss of Rs 13,416.91 crore for the quarter ended March 31, when the provisions gushed four times. It was also said that the it made provisions and contingencies of Rs 20,353.10 crore value for the quarter ended March. Talking about the gross non-performing assets (GNPAs) as a percentage of total advances, it reached to 18.38% in the Q4 from the previous 12.11% in Q3 and 12.53% in the quarter a year ago.

Now coming to the Andhra Bank, it has revealed a net loss of Rs 2,535.82 crore for the quarter. The chief reason cited for this huge loss was the higher non-performing assets. Andhra bank had a widened gross NPA with 17.09% of the total assets which was 12.25% in the corresponding quarter in the last year. Current Andhra Bank share price is 34.85 INR while the Punjab National Bank share price is 89.00 INR.