Why has RBI removed Indian Overseas Bank from the PCA framework? Is it positive?

RBI has confirmed that it has removed Indian Overseas Bank from the Prompt Corrective Action (PCA) framework. This is based on recent improvements in its profitability and its net NPAs. RBI announced that based on the Mar-21 results, IOB was not in breach of the Prompt Corrective Action parameters. Apart from the improved performance, RBI has also sought from IOB a written commitment of compliance from IOB.

The written commitment is to comply with basic stipulations like the Minimum Regulatory Capital, Net NPA and Leverage ratio limits. Like in other cases, the removal from PCA by the RBI will be subject to continuous monitoring of conditions being satisfied. It is positive for IOB as it can now focus on expanding branch network and its credit book. IOB can also pay dividends out of profits and also decide on appropriate rewards for senior managers.