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May 15, 2018

RBI bans Allahabad Bank from lending and accepting deposits

The Reserve Bank of India (RBI) has restricted state-run lender Allahabad Bank from lending to risky assets and raising high-cost deposits amid its worsening financial health.

The Kolkata-headquartered bank was also ordered to cut exposure to unrated and high-risk advances, to restrict creation of non-banking assets and to avoid accessing/renewing wholesale/costly deposits.

Earlier in January, the RBI put the lender under the prompt corrective action (PCA) due to high net NPAs and negative return on assets.

A lender placed under NPA avoids branch expansion and narrows its lending to relatively less risky segments to return to good health.

The RBI order comes at a time when the bank’s common equity tier-1 (core capital) breached the minimum regulatory requirement of 7.37% in March 2018.

Very recently, Dena Bank, which is also under PCA, said that RBI has the bank from issuing fresh credit due to growing non-performing assets (NPA).

Meanwhile, the government has started process to remove Allahabad Bank CEO Usha Ananthasubramanian after the CBI filed its first charge-sheet in the $2bn fraud at PNB.

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