The Reserve Bank of India reiterated on Friday that public sector banks were under no threat of a shutdown. The central bank was responding to what it called “misinformed communication” after it put Bank of India under Prompt Corrective Action on December 19.
On Wednesday, Bank of India said in a filing to stock exchanges that the RBI had placed it under the Prompt Corrective Action framework after an on-site inspection, based on its high non-performing loans and negative return on assets. Bank of India is the eighth bank the RBI placed under this framework.
The Prompt Corrective Action framework is “not intended to constrain normal operations of the banks”, the RBI said, quoting from a similar release in June. It called the framework one of the supervisory tools it uses to help banks maintain sound financial health.
Prompt Corrective Action involves “monitoring of certain performance indicators of the banks as an early warning exercise”, the RBI said. It puts a bank under the framework when capital or asset quality breach certain thresholds.
“Its objective is to facilitate the banks to take corrective measures, including those prescribed by the RBI, in a timely manner, to restore their financial health”.
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