NPA overload: RBI puts restrictions on Corporation Bank

MUMBAI: The Reserve Bank of India has imposed certain restrictions on Corporation Bank to carry out banking activities as its share of bad loans rose sharply.

The government-owned bank said the RBI has triggered prompt corrective action (PCA) against it in view of high non-performing loans and requirement to raise capital.

This makes Corporation Bank the eighth lender to face restrictions in a span of 10 months.

Once PCA is triggered, the bank faces restrictions on expenses such as on opening branches, recruiting staff and giving increment to employees. It can disburse loans only to those companies whose borrowing is above investment grades.

This action will not have any material impact on the performance of the bank and will contribute to improvement in its internal control and activities, Corporation Bank said in a news release.

In the past, the RBI has placed restrictions on Oriental Bank of Commerce, Dena Bank, Central Bank of India, IDBI Bank, Indian Overseas Bank, Bank of Maharashtra and UCO Bank.

The central bank clarified in the past that the banks were placed under PCA to facilitate them to take corrective measures to restore their financial health.