RBI restricts Corporation Bank from certain banking activities as its NPAs crosses 10%

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Corporation BankThe Reserve Bank of India (RBI) has restricted Corporation Bank from carrying out certain banking activities due to a sharp rise its bad loans.

Reportedly, the Non-Performing Assets (NPAs) of the government-owned bank has crossed 10 per cent. This restriction was imposed by the central bank in a bid to trigger prompt corrective action (PCA) against it in view of high NPAs and requirement to raise capital.

Corporation Bank is the eight in the list to face RBI’s wrath in 10 months.

Post the imposition of PCA, the bank will face restrictions on expenses such as opening branches, recruiting staff and giving increments to employees. In addition to this, the bank can disburse loans only to those firms whose borrowing is above investment grades.

“This action will not have any material impact on the performance of the bank and will contribute to improvement in internal control of the bank in its activities,” said RBI.

RBI had already placed restrictions on seven banks which namely Oriental Bank of Commerce, Dena Bank, Central Bank of India, IDBI Bank, Indian Overseas Bank, Bank of Maharashtra and UCO Bank.

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