Page 45 - Banking Finance April 2019

ARTICLE

PROMPT

CORRECTIVE

ACTION (PCA)

BY RBI: AN

OVERVIEW

Introduction: and one in the private sector, under the Reserve Bank's
Revised PCA Framework, with PCA having been imposed on
The Reserve Bank's PCA framework was introduced in
December 2002 as a structured early intervention them between February 2014 and January 2018. The share
of these PCA banks in advances and deposits as on March
mechanism. Subsequently, the framework was reviewed by
the Reserve Bank keeping in view the international best 31, 2018 was 18.5% and 20.8%, respectively.
practices and recommendations of the Working Group of the
Financial Stability and Development Council (FSDC) on Requirement of PCA:
Resolution Regimes for Financial Institutions in India (January The challenge before RBI was how under-capitalized banks,
2014) and the Financial Sector Legislative Reforms and more generally, banks whose asset quality and
Commission (FSLRC, March 2013). The Revised PCA profitability make them vulnerable to further stress, should
Framework was issued by the Reserve Bank on April 13, be dealt with. PCA is the corollary of the continuous failure of
2017 and implemented with respect to the bank financials such banks on the front of strengthening their balance sheets,
as on March 31, 2017. improving their capitalization, improving their asset quality.

Presently, there are twelve banks, eleven in the public sector Besides PCA, following are also a few steps the Reserve Bank
of India had undertaken to address the stressed assets
About the author problem of Indian banks.
Y Creation of Central Repository of Information on Large
Hemant Kumar Yadav Credits (CRILC) in early 2014;
B.Tech. CAIIB
Chief Manager (Research) in State Bank Y Asset Quality Review in 2015;
of India, State Bank Academy Y Reference of the largest, aged non-performing assets
Gurugram , Haryana (NPAs) to the Insolvency and Bankruptcy Code (IBC)

BANKING FINANCE | APRIL | 2019 | 45