The RBI on Tuesday issued a revised Prompt Corrective Action (PCA) framework for banks to enable supervisory intervention at “appropriate time” and also act as a tool for effective market discipline.
Capital, asset quality and leverage will be the key areas for monitoring in the revised framework, the banking regulator said.
The revised PCA framework will be effective from January 1, 2022.
“The objective of the PCA framework is to enable supervisory intervention at an appropriate time and require the supervised entity to initiate and implement remedial measures in a timely manner, so as to restore its financial health,” the central bank said.
The central bank also stressed that the PCA framework does not preclude the RBI from taking any other action as it deems fit at any time, in addition to the corrective actions prescribed.
“Indicators to be tracked for capital, asset quality and leverage would be CRAR/Common Equity Tier I Ratio, Net NPA Ratio and Tier I Leverage Ratio, respectively,” according to the revised framework.
