RBI issues revised Prompt Corrective Action framework for banks
"The objective of the PCA Framework is to enable Supervisory intervention at an appropriate time and require the Supervised Entity to initiate and implement remedial measures in a timely manner, so as to restore its financial health," the central bank said
The RBI on Tuesday issued a revised Prompt Corrective Action (PCA) framework for banks to enable supervisory intervention at "appropriate time" and also act as a tool for effective market discipline.
Capital, asset quality and leverage will be the key areas for monitoring in the revised framework, the RBI said.
The revised PCA framework will be effective from January 1, 2022.
See Zee Business Live TV Streaming Below:
"The objective of the PCA Framework is to enable Supervisory intervention at an appropriate time and require the Supervised Entity to initiate and implement remedial measures in a timely manner, so as to restore its financial health," the central bank said.
The PCA framework is also intended to act as a tool for effective market discipline.
The central bank also stressed that the PCA Framework does not preclude the Reserve Bank of India from taking any other action as it deems fit at any time, in addition to the corrective actions prescribed in the framework.
"Indicators to be tracked for capital, asset quality and leverage would be CRAR/Common Equity Tier I Ratio, Net NPA Ratio and Tier I Leverage Ratio, respectively," according to the revised framework.
Breach of any risk threshold may result in invocation of the PCA.
The framework will apply to all banks operating in India, including foreign banks operating through branches or subsidiaries based on breach of risk thresholds of identified indicators.
"A bank will generally be placed under PCA framework based on the Audited Annual Financial Results and the ongoing Supervisory Assessment made by RBI.
"RBI may impose PCA on any bank during the course of a year (including migration from one threshold to another) in case the circumstances so warrant," it said.
The framework also details conditions for exit from PCA and withdrawal of restrictions.
If a bank is put under the PCA, several restrictions are placed on it.
The restrictions are imposed on dividend distribution and remittance of profits, bringing in the capital (in the case of foreign banks), branch expansion, and capital expenditure.
The framework was last revised in April 2017.
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
RECOMMENDED STORIES
SBI 444-day FD vs Union Bank of India 333-day FD: Know maturity amount on Rs 4 lakh and Rs 8 lakh investments for general and senior citizens
Power of Compounding: Salary Rs 25,000 per month; is it possible to create over Rs 2.60 crore corpus; understand it through calculations
New Year Pick by Anil Singhvi: This smallcap stock can offer up to 75% return in long term - Check targets
PSU Oil Stocks: Here's what brokerage suggests on these 2 largecap, 1 midcap scrips - Buy, Sell or Hold?
Power of Compounding: How many years it will take to reach Rs 2 crore corpus if your monthly SIP is Rs 3,000, Rs 4,000, or Rs 5,000
Retirement Calculator: 40 years of age, Rs 50,000 monthly expenses; what should be retirement corpus and monthly investment
07:21 PM IST