Indian Overseas Bank hits 20% upper circuit after RBI relaxes PCA curbs

Shares of Indian Overseas Bank were locked at the 20 percent upper circuit at 24.60 in the early morning deals on Thursday after the Reserve Bank of India (RBI) removed the public sector lender from its PCA (Prompt Corrective Action) framework citing improvement in the bank’s financial and credit profile.

The stock witnessed a massive combined volume of around 51.56 million shares in the first hour of trades on the BSE and NSE. The stock has pared some gains, but is still up 12.2 percent at Rs 23 on the BSE, while the S&P BSE Sensex is down 10 points at 59,404 at 10, 05 am.

RBI said the bank has given the commitment to comply with the norms of Minimum Regulatory Capital, Net Non-performing Assets and Leverage ratio on an ongoing basis. It has apprised about the structural and systemic improvements in place to help the bank to meet these commitments.

According to India Ratings, IOB has been meeting the threshold to exit the PCA framework on a quarterly basis in the last four quarters and on an annual basis for FY21.

IOB was placed under in October 2015 on account of fight Net-Performing Assets (NPAs) and negative Return on Assets (RoA). It was barred from increasing risk-weighted assets.

For the quarter ended March 2021, the IOB’s net NPAs declined to 3.58 percent from 5.68 percent in March 2015 (FY15). It posted a net profit of Rs 831 crore in FY21 as against a net loss of Rs 454.33 crore in Fy15. The ROA was 0.27 percent for FY21 while it was negative at -0.16 percent for FY15.