Public Bank debacle is stopping nowhere in India. The ICRA Credit Rating Agency has said that five more Public banks are likely to be placed under the PCA of RBI. PCA is the Prompt Corrective Action framework for RBI where the performance monitoring is closely performed by the RBI. Punjab National Bank, Union Bank of India, Canara Bank, Andhra Bank and Punjab & Sind Bank are expected to join the list.
The PCA on public banks is initiated when certain warning thresholds are breached. The NNPA or Net Non-Performing Advances Ratio of these five banks are between 6.3% to 7.8%. The revised framework put the ratio as the Risk Threshold 1. The other criteria that are observed under this framework are Capital Adequacy Ratio and Return of Asset ratio as well.
According to the rating agency, the banks may need to recall the Additional Tier I bonds under this framework. These are done to increase the Capital Adequacy Ratio to meet the requirement of BESEL III, international banking regulations. The additional tier I recalling may infuse around 15,700 Crores from these five banks, reported Business Today.
Will it impact the investors? Well, yes, if an investor has bought such bonds for Premium Value, then the immature recall may result in the loss for the investors.
The other banks that are already part of the Public Bank Debacle control measure PSA are Overseas Bank, IDBI Bank, Corporation Bank, Central Bank of India, United Bank of India, Bank of Maharashtra, Oriental Bank of Commerce and Bank of India. These banks posted the NNPA of 9%.