Mumbai, Feb 1 (IANS): In a major decision on the eve of the Union interim Budget presentation, three state-run banks were on Monday removed from the list of lenders who are mandatorily implementing the Reserve Bank of India's (RBI) Prompt Corrective Action (PCA) framework for banks struggling with huge accumulated non-performing assets (NPAs or bad loans).

The three banks are Bank of India, Bank of Maharashtra and the Oriental Bank of Commerce, the RBI said in a statement.

It has been decided that Bank of India and Bank of Maharashtra which meet the regulatory norms including Capital Conservation Buffer (CCB) and have net NPAs of less than 6 per cent as per third quarter results, are taken out of the PCA framework subject to certain conditions and continuous monitoring," it said.

"In the case of Oriental Bank of Commerce, though the net NPA was 7.15 per cent, as per the published results of third quarter, the government has since infused sufficient capital and bank has brought the net NPA to less than 6 per cent."

With this decision, eight banks with high bad debts out of the original 11 that remain under the RBI's PCA framework that prohibits them from further lending in a situation where the accumulated NPAs in the Indian banking system had crossed the staggering level of Rs 10 lakh crore as of March 2018.

The government last month obtained parliamentary sanction for issuing additional recapitalisation bonds of Rs 41,000 crore for infusing capital into state-run banks.

Tabling the supplementary demand for grants in this regard in the Lok Sabha, then Finance Minister Arun Jaitley said the government will infuse Rs 83,000 crore in public sector banks (PSBs) in the remaining part of the fiscal taking the total recapitalisation of banks during the year to Rs 1.06 lakh crore.

Following this, Jaitley had told reporters here that he expected a few PSBs to exit the PCA framework.

This is the first major decision being taken by the new RBI Governor Shaktikanta Das appointed last month after the abrupt resignation of Urjit Patel following a period of serious tension between government and the central bank.

The vacancy caused by Patel's resignation as the RBI Governor, itself a rare phenomenon in the banking world, was immediately filled by the former Economic Affairs Secretary Das who was the vocal face during demonetisation and seen as a 'yes' man of the government.

The government's differences with the RBI centred 'n four issues - the former wanted liquidity support to head off any credit freeze risk, a relaxation in capital

requirements for lenders, relaxing the prompt corrective action PCA rules for banks struggling with accumulated NPAs, and support for micro, small and medium enterprises.

The government welcomed the RBI decision.

"Great news for banking sector - 3 banks (Bank of Maharashtra, Bank of India and Oriental Bank of Commerce) have come out of PCA norms which will enable credit flow. This will especially benefit MSME sector & home buyers with easier access to affordable credit," tweeted acting Finance Minister Piyush Goyal who is due to present the interim budget on Friday.