The Reserve Bank of India (RBI) has removed IDBI Bank from its enhanced regulatory supervision or Prompt Corrective Action (PCA) framework after a gap of nearly four years on improved financial performance. 

The RBI had placed IDBI Bank under the PCA framework in May 2017 after it had breached the thresholds for capital adequacy, asset quality (net NPAs were over 13 per cent in March 2017), return on assets and the leverage ratio.

The performance of IDBI Bank was reviewed by the Board for Financial Supervision (BFS) in its meeting held on February 18, 2021. It was noted that according to published results for the quarter ended December 31, 2020, the bank was not in breach of the PCA parameters on regulatory capital, net NPA and leverage ratio, the RBI said. 

The bank has also provided a written commitment that it will comply with the norms of minimum regulatory capital, net NPA and leverage ratio on an ongoing basis. The lender has also apprised the RBI of the structural and systemic improvements that it has put in place which will help it in continuing to meet these commitments.

“Taking all these parameters into consideration, it has been decided that IDBI Bank be taken out of the PCA framework, subject to certain conditions and continuous monitoring,” the RBI has said. 

Life Insurance Corporation-owned IDBI Bank had reported standalone net profit of Rs 378 crore for the December quarter of 2020-21 on the back of healthy growth in interest income. It had reported standalone net loss of Rs 5,763 crore in the year-ago quarter. 

Net interest income (NII) grew by 18 per cent to Rs 1,810 crore as against Rs 1,532 crore in the same quarter of the previous financial year. Its net interest margin (NIM) improved by 60 basis points to 2.87 per cent as compared to 2.27 per cent in the year-ago period. Gross NPA ratio declined to 23.52 per cent from 28.72 per cent in the third quarter of 2019-20. Net NPAs eased to 1.94 per cent as against 5.25 per cent.