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Good News for IDBI Bank Customers, Private Lender No More Under RBI’s PCA Monitoring

In what may infuse confidence in customers, the Reserve Bank of India (RBI) has removed IDBI Bank from its prompt corrective action (PCA) list.

This follows a review of IDBI Bank Limited, by the Board for Financial Supervision (BFS) in its meeting held on February 18, 2021.

“It was noted that as per published results for the quarter ending December 31, 2020 the bank is not in breach of the PCA parameters on regulatory capital, Net NPA and Leverage ratio,” the RBI said.

IDBI Bank has provided a written commitment that it would comply with the norms of minimum regulatory capital, net NPA and leverage ratio on an ongoing basis and has apprised the RBI of the structural and systemic improvements that it has put in place which would help the bank in continuing to meet these commitments, the RBI said.

“Taking all the above into consideration, it has been decided that IDBI Bank Limited be taken out of the PCA framework, subject to certain conditions and continuous monitoring, the RBI said.

Under PCA, RBI closely monitors weak banks which slip below certain financial parameters such as capital ratios, asset quality and profitability.

The RBI had put IDBI Bank under PCA in May, 2017.

Life Insurance Corporation -owned IDBI Bank reported a standalone net profit of Rs 378 crore for December quarter 2020-21 on the back of healthy growth in interest income. The lender had reported a standalone net loss of Rs 5,763 crore in the year-ago quarter.

On a consolidated basis, its profit after tax (PAT) stood at Rs 393.15 crore, compared to a loss of Rs 5,728.70 crore last year.

Net interest income (NII) grew 18 percent to Rs 1,810 crore as against Rs 1,532 crore in the same quarter of the previous fiscal. Its net interest margin (NIM) improved by 60 basis points to 2.87 percent as compared to 2.27 percent in the year-ago period.

Gross NPA ratio declined to 23.52 percent from 28.72 percent in the third quarter of the previous fiscal. Net NPAs eased to 1.94 percent as against 5.25 percent. Provision coverage ratio (including technical write-offs) improved to 97.08 percent from 92.41 percent.

During the quarter, it raised equity capital of around Rs 1,435.18 crore by way of QIP. Its capital to risk weighted asset ratio (CRAR) improved to 14.77 percent as against 12.56 percent in the same quarter of the previous fiscal. Advances fell 7 percent to Rs 1,59,663 crore and deposits grew marginally by 3 percent to Rs 2,24,399 crore.