After PNB scam, RBI issues corrective framework for PSBs

Amid the multiple scams unearthed recently in the banking sector, the Reserve Bank of India (RBI) has issued a Prompt Corrective Action (PCA) framework to maintain the sound financial health of banks.

The framework facilitates banks in breach of risk thresholds for identified areas of monitoring, such as capital, asset quality (tracked in terms of the net Non-Performing Assets ratio) and profitability, to take corrective measures in a timely manner, in order to restore their financial health.

Therefore, the RBI, through this corrective framework, intends to encourage banks to abstain from certain riskier activities, improve operational efficiency and focus on conserving capital to strengthen them, as stated by Minister of State (MoS) for Finance, Shiv Pratap Shukla, in a written reply to a question in Lok Sabha on Friday.

However, the minister clarified that the framework is not intended to constrain the performance of normal operations of the banks for the general public.

Among the PSBs selected by the central bank for the PCA framework include Dena Bank, Central Bank of India, Bank of Maharashtra, UCO Bank, IDBI Bank, Oriental Bank of Commerce, Indian Overseas Bank, Corporation Bank, Bank of India, Allahabad Bank and United Bank of India.

Meanwhile, the Enforcement Directorate (ED) could soon hand over loan defaulters Nirav Modi and Vijay Mallya's attached properties to state-owned construction company National Buildings Construction Corporation (NBCC), Business Standard reported.

According to the report, NBCC would rent these attached properties out for commercial or residential purposes.

The publication said that the decision was taken earlier this week at a meeting in the finance ministry under chairmanship of finance secretary Hasmukh Adhia.

The ED manages attached properties. There is no provision under the Prevention of Money Laundering Act (PMLA) for renting out of seized properties to earn revenue. The Act is expected to be amended soon to enable putting immovable assets on rent.

"The proposal is for managing land of around 25,000 acres, as well as over 300 establishments, including factories, flats, buildings and shops, which have been taken over by the ED," an NBCC official told the newspaper.

Punjab National Bank