Prompt Corrective Action (PCA) Framework for NBFCs
Part of: Prelims and GS-III -Economy
Context The Reserve Bank of India announced a Prompt Corrective Action (PCA) Framework for Non-Banking Financial Companies (NBFCs), to strengthen applicable supervisory tools.
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Key takeaways
This will take effect October 1, 2022.
This is in line with the PCA framework for banks
Aim is to help improve their financial condition and governance issues.
The framework will apply to all deposit-taking NBFCs, all non-deposit taking NBFCs in the middle, upper and top layers,
It has excluded NBFCs not accepting or not intending to accept public funds, primary dealers and housing finance firms, along with government-owned ones.
Non-Banking Financial Company
It is a financial institution that does not have a full banking license or is not supervised by a national or international banking regulatory agency.
The most important difference between non-banking financial companies and banks is that NBFCs don’t take demand deposits.
