What’s holding back Bank of Maharashtra?

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Editor's note: April 2017. Bank of Maharashtra had just declared its fourth quarter results for the 2016-17 fiscal year and they were not a pretty sight. Its gross bad loan ratio was at 16.93%, and had risen by 65% over a year. The bank’s capital was eroding fast and its capital adequacy ratio had plummeted to 11.18%—well below the Reserve Bank of India’s 12% minimum. The net loss for the year was over Rs 1,300 crore; every quarter in the fiscal had thrown up a loss. A concerned RBI had no option but to intervene. With depleting capital, rising bad loans and mounting losses, the bank was fast sliding to a point of no return. So, in June 2017, it placed it under the prompt corrective action, or PCA, framework—a structured early-intervention mechanism for banks that become undercapitalized due to poor asset quality, or vulnerable due to loss of profitability. As a consequence, strictures were placed on the bank’s lending activities. A year and a half later, in December 2018, when the current managing director and CEO of the bank—A.S. Rajeev—took charge, …