After four years of handcuff, Kolkata-headquartered UCO Bank will have no lending restrictions as it exited from the RBI-imposed prompt corrective action (PCA) framework on the back of improved financial position and reduction in bad loans. 

Now only two banks -- Central Bank of India and Indian Overseas Bank (IOB) -- continue to be under the Reserve Bank of India’s PCA list. Both the banks have made representations to the regulator and expect to soon be released from the curbs imposed on them. In 2017, the RBI had put 11 banks under the PCA framework, which entail curbs on high-risk lending, setting aside more money on provisions and restrictions on management salary. 

UCO Bank, which had slipped into the PCA list in May 2017, has provided a written commitment that it would comply with the norms of minimum regulatory capital, net non-performing asset (NPA) and leverage ratio on an ongoing basis. The state-run bank has also apprised 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 performance of the UCO Bank, currently under the prompt corrective action framework of RBI, was reviewed by the Board for Financial Supervision. It was noted that as per its published results for the year ended March 31, 2021, the bank is not in the breach of the PCA parameters,” RBI said. 

Though the central bank has taken UCO Bank out of the PCA restrictions, this is subject to certain conditions and continuous monitoring. 

UCO Bank had requested RBI to lift it out of the PCA after the bank had reported profits for three straight quarters in FY21. The bank had also brought down its pile of bad debt to 9.37% of its total advances for the first quarter ended June 2021, from 14.38% a year ago. The bank’s net NPA is at 3.85%. 

Prompt corrective action is triggered if a bank's net non-performing loan ratio crosses a level of 6% or if the capital requirements, to be maintained under the RBI norms, are breached. 

On 26 August, the central government had extended the tenure of Atul Kumar Goel as managing director and CEO of UCO Bank for a period of two years.