Bank of India (BOI), a public sector bank that came under the RBI’s Prompt Corrective Action (PCA) framework recently, has begun the new year on a strong note, recovering as much as ₹2,000 crore over the last fortnight, a top official said.
This recovery, coupled with the government’s ₹2,257 crore capital support under the Indradhanush programme, is expected to help the bank to soon come out of the PCA framework, Dinabandhu Mohapatra, Managing Director and CEO, told BusinessLine.
BOI has recovered ₹2,000 crore by invoking the Standby Letter of Credit (SLOC) issued by other banks, he said. As much as 70 per cent of loans have SLOC issued by other banks. Nearly 65 per cent of the NPAs are already covered under provisions.
It may be recalled that the RBI had, in the third week of December 2017, placed BOI under its PCA framework. This was done in view of the high net NPA, insufficient Common Equity Tier-1 capital and negative return on assets (RoA) for two consecutive years.
“RBI had brought us under PCA based on the financial position as of March 2017. We see PCA as an enabler and not as a dampener. In the last six months, we have changed the working of BOI in line with new-age banking,” Mohapatra said.
Icing on the cake
The icing on the cake for BOI is the recent surge in metal prices, both within and outside the country, which has raised buyers’ interest in the stressed steel assets that have been referred to the National Company Law Tribunal (NCLT) under the RBI’s first list.
BOI has an aggregate exposure of ₹8,300 crore in 10 of the 12 cases under the first list.
“Compared to a month back, today the situation is much better as certain commodity prices have gone up. More bidders are now interested in certain assets in the metals space. Banks will get more value. Banks are going to getter value for those assets and nobody will lose big money,” he said.
In the RBI’s second list of about 28 cases, BOI has exposure of about ₹3,300 crore in 16-17 cases.