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Kudos to BOI – one of the top public sector banks out of PCA framework by RBI

The decision to put out of PCA norms of 3 banks by the new RBI Governor Shaktikanta Das appointed last month after the abrupt resignation of Urjit Patel following a period of serious tension between government and the central bank is really to be appreciated. The Reserve Bank of India has put several banks under PCA for not maintaining a desirable level of capital which restricts their business activity.

Amongst three, Bank of India is one of the largest bank and trust branded banks in India which meet the regulatory norms including Capital Conservation Buffer (CCB) and have net NPAs of less than 6 per cent as per third quarter results. The RBI had brought us under PCA based on the financial position as of March 2017. BOI saw PCA as an enabler and not as a dampener. The efforts of MD and CEO and three dynamic Executive Directors have changed the working of BOI in line with new-age banking. There is no doubt that BOI, a strong public sector bank that came under the RBI’s Prompt Corrective Action (PCA) framework has begun the new- year on a strong note by working hard on various strong strategies adopted by the management. Bank has been able to re-balanced its asset book in favour of retail, SME, and agriculture. Bank gave priorities on NPA management, augmentation of CASA, re-balancing of advances in favour of the retail portfolio and stable growth in quality assets.

Bank of India’s net loss widened during the quarter ended December 31, 2018, is due to higher provisioning for non-performing assets (NPAs). BOI reported a provision coverage ratio of over 76% for December 2018, which is one of the highest for any public sector banks. The bank made provision worth Rs 9,179.48 crore for NPAs during the quarter under review from Rs 4,373.06 crore made during the previous corresponding quarter of 2017-18. However, it is to be appreciated that the net interest income increased by 33.23 per cent to Rs 3,332 crore in the quarter under review from Rs 2,501 crore in Q3FY18. The bank is expecting a write off of Rs 2,600 crore from the NLCT accounts in the coming March quarter. In absolute terms, the gross NPAs of the bank stood at Rs 60,797.55 crore at end-December 2018 from Rs 64,248.58 crore a year ago period. Net NPAs have valued at Rs 19,437.35 crore as against Rs 36,117.23 crore. Operating profit is BOI’s great strength and taking charge MD & CEO Dinabandhu Mohapatra took certain initiatives and going forward, the results that Bank was expecting are definitely above that situation. He joined at a time when Bank of India posted losses for the second consecutive year and by way of implementing various turnaround strategies BOI is now on a better position.

The main achievement of Bank of India is that the net non-performing asset ratio has fallen to 5.87 per cent, which is below the RBI’s 6 percent threshold to invoke PCA. Similarly, the capital adequacy ratio also stood at 12.47 percent at the end of the third quarter, well above RBI’s threshold of 10.25 percent. Bank of India the most trust branded banks in India is now a household name and synonymous with growth, development, and efficiency. One thing is clear that BOI has built “Relationship Beyond Banking” with its millions of its customers across the globe who are ambassadors of goodwill.

(The views expressed by the author in the article are his/her own.)
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