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  3. No plan to shut any public sector bank: RBI

No plan to shut any public sector bank: RBI

26 Dec 2017 Evaluate

The government and the Reserve Bank of India (RBI) have firmly dismissed rumours of closure of some public sector (PSU) banks, saying there was no question of closure of any PSU Banks. There were apprehensions being raised and rumours being spread that the government may close down some banks after RBI decided to initiate a “prompt corrective action” (PCA) against large state-owned lenders.

The RBI in its release said that it has come across some “misinformed communication” circulating in some section of media, including social media, about closure of some public sector banks in the wake of their being placed under the PCA and clarified that “the PCA framework is not intended to constrain normal operations of the banks for the general public”. It emphasised that the PCA framework has been in operation since December 2002 and the guidelines issued on 13 April 2017 are only a revised version of the earlier framework. The central bank had issued a similar clarification in June also. It said “PCA framework is one of such supervisory tools, which involves monitoring of certain performance indicators of the banks as an early warning exercise and is initiated once such thresholds as relating to capital, asset quality, etc., are breached”.

The government on its part too, dismissed such rumours saying that on the contrary it is planning to strengthen the public sector banks. Financial services secretary Rajeev Kumar said “No question of closing down any bank. Government is strengthening PSBs by 2.11 lakh crore recapitalisation plan'.

Public sector banks placed under the PCA framework so far include Indian Overseas Bank, Dena Bank, Corporation Bank, Central Bank of India, IDBI Bank, UCO Bank, United Bank of India, Bank of Maharashtra, Oriental Bank of Commerce, and Bank of India. RBI has said that placing banks under the PCA framework will not affect their normal operations.

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