Public sector banks in india are under severe stress as their non performing assets (NPA) are seen increasing manifold leading to huge losses.A sector known to create thousands of new jobs every year is facing a huge crisis thereby pushing RBI (Reserve bank of India) to take stock of the situation.To contain growing losses, the central bank has taken prompt correction action (PCA) ordering Indian Overseas Bank to stop new recruitments.
IBPS (Institute of Banking Personnel Selection) is the organization that conducts recruitments for 20 govt owned banks in India.Anyone who wishes to join a public bank should qualify in these IBPS exams & interviews.
Last year, approximately 41,000 bank jobs were announced for qualifiers of IBPS bank exams held for officer (PO), clerk & specialist officer positions.
But, there were 0 vacancies in Indian Overseas Bank for 2016-17.
Why IOB did not Recruit Last Year?
The Chennai based Indian Overseas Bank (IOB) is one of the nation`s oldest public sector bank but their gross NPAs rose to Rs. 30,049 crore during the past five years.
It means nearly 17.40% are bad loans of their overall advances.
This situation reflected in its 3rd quarters results with the bank declaring a humongous Rs.1425 crore loss.
Since IOB was way ahead of permissible limits set on NPAs, PCA was imposed on them.
What is Prompt Corrective Action (PCA)?
Reserve Bank of India normally initiates ‘prompt corrective action’ on a bank when bad loans cross 10% mark, capital adequacy ratio slips below 9% & return on assets falls below 0.25 per cent.
RBI would place the following restrictions on the bank as part of PCA:
- Cannot recruit new employees
- Curtail branch expansion
- Should not enter any new business
- Improve internal controls
- Consolidate business activities
- Increase recovery of bad loans
Since the guidelines does not allow hiring new people, Indian overseas bank did not declare any vacancies for IBPS exam 2015 qualifiers.
Will IOB Conduct Recruitments in Future?
The corrective action is taken on account of bank`s surging NPA & poor performance. So the directions of PCA will continue until IOB returns to profitability.
Indian overseas bank has a long road ahead to trim its NPAs because recovering such large amount of bad loans is not an easy task.Therefore, no definite timeline was committed by the management.
It might take atleast 2 years or even more to see IOB start notifying new vacancies again.
In 2014, the RBI initiated a prompt corrective action against United Bank of India which was lifted in March 2015 after the bank brought down their NPAs.
4 more Banks Could Face RBI Action
As mentioned earlier, all public sector banks are bleeding losses for the past few quarters. Their biggest worry is rising NPA & slow recovery process which could trigger RBI`s PCA if left uncontained.
The gross NPA of all public banks stands at a whooping Rs.5,90,772 crore, a 67% increase compared to previous year.
Atleast 4 banks are in a dangerous position as per reports, owing to their higher than allowed NPA ratios.They are:
- UCO Bank
- United Bank of India
- Bank of India
- Punjab National Bank
As of now, there is no action imposed on these banks.But RBI in its next review may impose PCA order on these banks if their performance worsens.
In such a case, banks should stop recruitments altogether until they bounce back.It will also lead to decrease in overall number of bank jobs filled through IBPS exams.
It was announced recently that SBI associate banks wont recruit after its merger with State Bank of India & Bharatiya mahila bank.This could probably be the reason for favor bank mergers.
The next few years are crucial, for govt banks & even for bank job aspirants!