June 17, 2017 / 4:14 PM / 2 years ago

Bank of Maharashtra put under RBI 'corrective action' due to bad loans

The Reserve Bank of India (RBI) seal is pictured on a gate outside the RBI headquarters in Mumbai, India, February 2, 2016. REUTERS/Danish Siddiqui/Files

MUMBAI (Reuters) - The Reserve Bank of India (RBI) has initiated “prompt corrective action” for state-run Bank of Maharashtra Ltd because of its high level of bad loans, the lender said in a stock exchange filing on Saturday.

The mid-sized institution is the fifth state-run lender to come under curbs since the RBI tightened the corrective action framework in April to help cut the $150 billion of troubled loans afflicting banks.

Bank of Maharashtra said the corrective actions will not have any material impact on its performance, but will help strengthen its internal controls, and improve asset quality and profitability.

The bank’s net non-performing assets (NNPA) ratio rose to 11.76 percent at the end of March, from 10.67 percent at end-December.

Under RBI rules, prompt corrective action is triggered if a bank’s NNPA ratio crosses 6 percent.

Lenders with an NNPA ratio of more than 9 percent fall in the “risk threshold 2” category, and can be asked by the regulator to restrict branch expansion and make higher provisions on sour loans, among other curbs.

Reporting by Devidutta Tripathy; Editing by Dale Hudson

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