Dena Bank is heading for prompt corrective action (PCA) after reporting net loss for a second consecutive financial year.
Under PCA, the Reserve Bank of India (RBI) will clamp restrictions on business activities, including curbs on lending and branch expansion. This is done to bring an ailing bank on the recovery path.
The public sector lender’s net loss for the year ended March 2017 declined to Rs 836 crore from Rs 935 crore in year ended March 2016.
Ashwani Kumar, chairman and managing director of Dena Bank, said the RBI would put restrictions on lending. The lender would also not increase headcount this financial year. There might be replacement hiring for those retiring, Kumar added. The bank will not open new branches in 2017-18 but will focus on rationalising branches. The Mumbai-based public sector lender had 1,874 branches at the end of March 2017, up from 1,846 branches a year ago. Dena is one of the 10 public sector bank identified by the government that will have to present a medium-term turnaround plan before it can get capital.
Its stock closed lower by five per cent at Rs 44 a share on the BSE. Dena’s net interest income for the reporting quarter declined from Rs 625 crore in January-March 2016 to Rs 450 crore.
Net loss widened to Rs 575 crore in fourth quarter ended March 2017 from Rs 326 crore in the fourth quarter of the previous financial year, due to a fall in net interest income and rise in provisions for bad loans. Provisions for non-performing asset (NPAs) rose to Rs 972 crore in Q4FY17 from Rs 900 crore in Q4FY16. Gross NPAs rose to Rs 12,618 crore (16.27 per cent) at the end of March 2017 from Rs 8,560 crore (9.98 per cent) at the end of March 2016.
Net NPAs were at 10.66 per cent for the end of March 2017, another reason for triggering the PCA.
The board has approved a proposal to raise equity capital of up to Rs 1,800 crore through issuance of shares to government on preferential basis and via routes such as qualified institutional placement.
The capital adequacy ratio stood at 11.39 per cent with tier-I capital of 9.05 per cent at the end of March 2017.