The Reserve Bank of India (RBI), the central bank of the country, has restricted state-run lender Dena Bank from issuing fresh credit due to growing non-performing assets (NPA).
The central bank has also barred Dena Bank to recruit new personnel.
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In a regulatory filing, Dena Bank stated that the RBI had initiated Prompt Corrective Action on it and has imposed certain restrictions due to high Net NPA and negative RoA.
Accordingly, now the bank can disburse already sanctioned loans but cannot issue new ones.
Dena Bank was put under the prompt corrective action (PCA) framework in May last year, which prevented the bank from disbursing dividends.
As the financial conditions of the bank did not improve in the last one year, RBI has directed Dena Bank to stop lending and recruiting process.
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By GlobalDataThese decisions are part of the PCA framework, reported The Hindu.
Currently, multiple banks are under PCA framework, but Dena Bank is the first financial institution to have its fresh lending barred.
In the quarter of January to March 2018, Dena Bank posted a loss of INR12.25bn ($181.8m), compared to INR5.75bn in the same period a year earlier.
Following the announcement, the shares of Dena Bank fell by more than 12%.
