{"id":86287,"date":"2019-09-29T15:46:31","date_gmt":"2019-09-29T10:16:31","guid":{"rendered":"http:\/\/factly.forumias.com\/?p=10523"},"modified":"2021-11-03T18:11:24","modified_gmt":"2021-11-03T12:41:24","slug":"prompt-corrective-action-pca","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/prompt-corrective-action-pca\/","title":{"rendered":"Prompt Corrective Action (PCA)"},"content":{"rendered":"\r\n\r\n\r\n<h5><strong>What is Prompt corrective action(PCA)?<\/strong><\/h5>\r\n\r\n\r\n\r\n<ul class=\"wp-block-list\">\r\n<li>PCA is a framework under which banks with weak financial metrics are put under watch by the RBI.<\/li>\r\n<li>The RBI introduced the PCA framework in 2002 as a structured early-intervention mechanism for banks that become undercapitalised due to poor asset quality, or vulnerable due to loss of profitability.<\/li>\r\n<li>These regulations were revised in April 2017.<\/li>\r\n<li>It aims to check the problem of Non-Performing Assets (NPAs) in the Indian banking sector.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<h5><strong>When is PCA invoked?<\/strong><\/h5>\r\n\r\n\r\n\r\n<ul class=\"wp-block-list\">\r\n<li>RBI uses PCA framework to rein in banks that have breached certain regulatory thresholds in bad loans and capital adequacy.<\/li>\r\n<li>PCA entails curbs on high-risk lending, setting aside more money on provisions and restrictions on management salary.<\/li>\r\n<li>There are three risk thresholds which are based on certain levels of asset quality, profitability, capital and net non performing assets(NPA) ratio.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<h5><strong>Types of restrictions<\/strong><\/h5>\r\n\r\n\r\n\r\n<ul class=\"wp-block-list\">\r\n<li>There are two types of restrictions mandatory and discretionary restrictions.<\/li>\r\n<li>The restrictions on dividends, branch expansion, directors compensation are mandatory while discretionary restrictions could include curbs on lending and deposit.<\/li>\r\n<li>RBI may also place restrictions on credit by PCA banks to unrated borrowers or those with high risks but it doesn\u2019t invoke a complete ban on their lending.<\/li>\r\n<li>RBI may also impose restrictions on the bank on borrowings from interbank market.<\/li>\r\n<li>Further, the banks may also not be allowed to enter into new lines of business.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<p><strong>Additional information:<\/strong><\/p>\r\n\r\n\r\n\r\n<p><strong>Non Performing Asset(NPA):<\/strong><\/p>\r\n\r\n\r\n\r\n<ul class=\"wp-block-list\">\r\n<li>A non performing asset (NPA) is a loan or advance for which the principal or interest payment remains overdue for a period of 90 days.\u00a0<\/li>\r\n<li>The banks are required to classify NPAs further into Substandard, Doubtful and Loss assets.<\/li>\r\n<\/ul>\r\n","protected":false},"excerpt":{"rendered":"<p>What is Prompt corrective action(PCA)? PCA is a framework under which banks with weak financial metrics are put under watch by the RBI. The RBI introduced the PCA framework in 2002 as a structured early-intervention mechanism for banks that become undercapitalised due to poor asset quality, or vulnerable due to loss of profitability. These regulations&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/prompt-corrective-action-pca\/\">Continue reading <span class=\"screen-reader-text\">Prompt Corrective Action (PCA)<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[3127],"tags":[772,394],"class_list":["post-86287","post","type-post","status-publish","format-standard","hentry","category-economy","tag-prompt-corrective-action","tag-rbi","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1700152394},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/86287","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=86287"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/86287\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=86287"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=86287"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=86287"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}