Subjected to certain conditions and continuous monitoring, IDBI Bank will be taken out of the Prompt Corrective Action (PCA) framework, as decided by the RBI. Under the PCA, a bank’s branch expansion gets restricted, also the lending is restricted to relatively less risky segments for nursing it back to health. This current development comes along with the Budget announcement in which the government is aiming towards strategic disinvestment of its stake in IDBI Bank in FY2022.

The RBI had invoked the PCA against IDBI Bank in 2017 due to its huge non-performing assets and a negative return on them.  On February 18, the Board for Financial Supervision reviewed the performance of IDBI Bank, noticing that going through the results for the quarter ending December 31, 2020, the bank was not in breach of the PCA parameters on regulatory capital, net NPA, and leverage ratio. The RBI announced in a statement that the bank has given a written commitment about them complying with the norms of minimum regulatory capital, Net NPA, and leverage ratio on an ongoing basis, and has informed the RBI of the structural and systemic improvements that were put in place to support the bank to meet these commitments.

IDBI Bank intends to clear accumulated losses of about ₹44,500 crores against the balance standing to the credit of the Securities Premium Account (SPA) after the declaration of its fourth-quarter results. This will enable the bank to represent its true financial position. It will also help the bank raise resources via AT 1 Bonds since it will become eligible to make coupon payments.