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Prompt Corrective Action Framework (PCAF) of RBI

  • IASbaba
  • September 22, 2022
  • 0
Economics
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In news: After reviewing the performance of the Central Bank of India, The Reserve Bank of India (RBI) removed it from its Prompt Corrective Action Framework (PCAF) after the lender showed improvement in various financial ratios, including minimum regulatory capital and net non-performing assets (NNPAs).

About PCAF:

  • The PCA norm is a supervisory tool of RBI.
  • It is imposed when a bank breaches certain regulatory threshold: –
  • Capital: (Breach of Capital Risk Adequacy Ratio)
  • Asset qualitye., net NPAs
  • Leverage
  • Aim: to initiate and implement remedial measures in a timely manner, so as to restore its financial health.
  • Scope: Apply to all banks operating in India including foreign banks operating through branches or subsidiaries.
  • Conditions for Withdrawal of restrictions imposed:
  1. a) if no breaches in risk thresholds in any of the parameters are observed as per four continuous quarterly financial statements
  2. b) based on Supervisory comfort of the RBI, including an assessment on sustainability of profitability of the bank.

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Source:  Indian Express

Previous Year Question

Q.1) Which of the following statements best describes the term ‘Scheme for Sustainable Structuring of Stressed Assets (S4A)’, recently seen in the news? (2022)

  1. It is a procedure for considering ecological costs of developmental schemes formulated by the Government.
  2. It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties.
  3. It is a disinvestment plan of the Government regarding Central Public Sector Undertakings.
  4. It is an important provision in The Insolvency and Bankruptcy Code’ recently implemented by the Government.

 

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