RBI said that the purpose of implementing the PCA framework is to implement the right measures at the right time for the improvement of the supervised institution, so that the financial health of that institution can be improved. RBI said that the PCA framework is applicable to all banks operating in India.
New Delhi. The Reserve Bank of India (RBI) has released a revised Prompt Corrective Action (PCA) framework for banks. The central bank has reviewed and modified the existing PCA Framework List of Schedule Commercial Banks, which will come into effect from January 1, 2022, next year. The central bank said that the objective of the PCA framework is to enable timely supervisory interventions.
RBI said that the purpose of implementing the PCA framework is to implement the right measures at the right time for the improvement of the supervised institution, so that the financial health of that institution can be improved. RBI said that the PCA framework is applicable to all banks operating in India. These also include those foreign banks, which are operating in India through their branches or subsidiaries.
Assessment of financial position of banks
Under the PCA framework, the financial health of banks is measured on the basis of certain parameters. These parameters include factors like capital of the bank, asset quality and leverage. A bank is usually placed in the PCA framework on the basis of its annual financial results and supervisory evaluation done by RBI.
The bank can be added to the PCA list at any time
Depending on the circumstances, RBI can put the bank in the PCA list at any time of the year. When a bank is placed under PCA, one or more corrective measures are taken depending on its exposure limit.
RBI can impose many restrictions on banks under the PCA framework. In this, banks can be banned from giving dividend in profits, prohibiting opening of new branches in the country or abroad, ban on giving new loans, even on the salary of people involved in management and directors.
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