Mumbai: The Bank of India, one of the major public sector lenders in country, has chalked out a plan to shut down as many as 700 automated teller machines as part of a cost cutting measure as the lender looks at turnaround. The closure of these ATMs is likely to be completed by the February end next year, according to a report in Business Standard.
The bank is at present conducting a study so as to arrive at a formula to dispense with these ATMs. The latest move from the BoI comes in the aftermath of the Reserve Bank of India starting a ‘prompt corrective action’ against it for mounting bad loans. The measure taken by the central bank places various restrictions on the lender including issuing of fresh loans and dividend distribution, BoI said in a statement on Friday.
The BoI has already brought down number of ATMs in country from 7,807 in December last year to 7,717 in April, according to a presentation on the Bank of India website. However, Dinabandhu Mohapatra, MD and CEO said that the bank had already been working on a turnaround plan for the past six months.
In a filing to stock exchanges, BoI said the RBI has placed it under Prompt Corrective Action Framework, consequent to the onsite inspection under the risk-based supervision model carried out for the year ended March 2017.
“This is in view of high net NPA, insufficient CET1 Capital and negative ROA (return on asset) for two consequent years. This action will contribute to the overall improvement in risk management, asset quality, profitability, efficiency, etc of the bank,” BoI said.
At the end of March 2017, the bank’s asset quality worsened with gross non-performing assets (NPAs) at 13.22 percent, as against 13.07 percent in the previous year. Net NPAs, however, improved to 6.90 percent from 7.79 percent.
For the second quarter ended September, 2017-18, asset quality improved as gross NPAs declined marginally to 12.62 percent of gross advances, from 13.45 percent a year ago.
Net NPAs also improved to 6.47 percent of net advances for the period under review, down from 7.56 percent a year ago.
In absolute terms, gross NPAs stood at Rs 49,306.90 crore as on September 2017, from Rs 52,261.95 crore earlier.
The RBI has initiated similar action against other public sector lenders including IDBI Bank, Indian Overseas Bank and UCO Bank.
The Reserve Bank in April had issued a new set of enabling provisions under the revised PCA framework with a clause that if the bank does not show improvement then it could be either be merged or taken over by other bank. (PTI)