RBI Revises Quick Corrective Action Framework for Commercial Banks, Effective January 1, 2022

RBI revised quick remedies framework for banks

The Reserve Bank of India has revised the existing Rapid Corrective Action Framework (PCA) for scheduled commercial banks, which will be applicable from January 1, 2022. The main objective of this exercise is to enable prudential intervention at a time appropriate, following which, the supervised entity must implement corrective actions within a specified time frame to restore financial stability.

In a statement released on Tuesday, RBI said the PCA framework would apply to all banks operating in India, including foreign banks operating through branches or subsidiaries based on the risk thresholds being exceeded for indicators. identified.

The central bank will monitor important areas such as capital, asset quality and bank indebtedness as part of the exercise.

Normally, a bank is placed under the PCA on the basis of its annual audited financial results and the ongoing prudential assessment performed by the RBI.

The RBI can impose a PCA on any bank in the course of a year (including moving from one threshold to another) if the circumstances warrant.

Once a bank is placed under remedial action, a few changes are suggested to it, based on the bank’s risk threshold, by the RBI.

The RBI may impose mandatory restrictions on the distribution of dividends from the profits of the bank in question and may also restrict the expansion of a bank’s branches (domestic and foreign).

About Ruben V. Albin

Check Also

Montague slams commercial banks for ‘mistreating customers’

On Wednesday, St Mary Western MP Robert Montague launched a campaign against commercial banks, over …