The Reserve Bank of India (RBI) has barred State-run lender Dena Bank from extending fresh credit in view of deteriorating financial health due to mounting non-performing assets (NPAs). In addition, the lender has also been barred from recruiting staff.
“We wish to inform that the RBI, vide their letter dated May 7, 2018, has restricted the Bank from assuming fresh credit exposure and recruitment of staff,” Dena Bank said in a notification to the stock exchanges.
This means the bank can disburse loans for the credit facilities already sanctioned, but cannot sanction fresh loans.
In May last year, the RBI had put the lender under the prompt corrective action (PCA) framework, which meant dividend payments were not allowed. Despite the earlier restrictions, the financial health of the bank did not show any signs of improvement, which has now prompted the banking regulator to freeze lending. This action is also a part of the PCA framework.
Though several banks are under the PCA framework currently, Dena Bank is the first lender to have fresh lending curbed. RBI may decide to lift the restrictions in case the bank improves profitability and reduces bad loans.
The lender on Friday reported that loss for the Jan.-March quarter had widened to ₹1,225.42 crore compared with the same period of the previous year, when the loss was ₹575.26 crore. For the financial year 2017-18, the bank had posted a net loss of ₹1,923.15 crore. This is the third consecutive year the bank has posted a net loss.
Source Article: RBI bars Dena Bank from lending, hiring (The Hindu)
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