The Reserve Bank of India (RBI) has imposed sanctions on state-run lender IDBI Bank after its financial position weakened, a move which will restrict the lender from expanding its branches and distributing dividend among others.
IDBI Bank is the first lender to attract sanctions from RBI after the banking regulator revised its prompt corrective action framework last month. Such sanctions are imposed if a bank breaches certain level of net non-performing assets (NPA), Return on Asset (RoA) and capital adequacy ratio.
The lender has informed the exchanges that RBI, in a letter dated May 5, has initiated prompt corrective action in view of high net non-performing assets (NPA) and negative Return on Asset.
“This action will not have any material impact on the performance of the bank and will contribute to improving the internal controls of the bank and improvements in its activities,” the bank said.
According to RBI sources, IDBI Bank had breached the risk threshold 2 following which mandatory sanctions were imposed.
Restrictions on dividend distribution, domestic and overseas branch expansion, higher provision, are part of mandatory restrictions. Sources, however, added that discretionary restrictions like lending or deposit curbs have not been imposed.
Sources said sanctions will be imposed on another 1 or 2 more banks shortly.
