Context:
RBI issued Prompt Corrective Action (PCA) framework for Primary Urban Co-operative Banks (UCBs)
Prompt Corrective Action (PCA):
- Early-intervention mechanism for banks that become undercapitalised due to poor asset quality, or vulnerable due to loss of profitability.
- Introduced by – Reserve Bank of India (RBI) in 2002
- Aim – To check the problem of Non-Performing Assets (NPAs) in the Indian banking sector.
- Intended to help alert the regulator as well as investors and depositors if a bank is heading for trouble.
- Reviewed in – 2017 based on the recommendations of the Financial Sector Legislative Reforms Commission.
- Applicable to – Scheduled commercial banks and Non-banking financial companies.
Prompt Corrective Action (PCA) framework for Primary Urban Co-operative Banks (UCBs):
- Objective – To address the financial health of UCBs with greater precision and flexibility.
- Application – To all UCBs in tier 2, tier 3, and tier 4 categories, with the exception of those under All Inclusive Directions (AID).
- Key areas for monitoring – Capital, Asset Quality and Profitability of UCBs
- Exit from PCA and withdrawal of Restrictions – If no breaches in risk thresholds in any parameters are observed as per 4 successive quarterly financial statements.
Source: Business Standard
Previous Year Question
With reference to the Indian economy, “Collateral Borrowing and Lending Obligations” are the instruments of:
[UPSC Civil Services Exam – 2024 Prelims]
(a) Bond market
(b) Forex market
(c) Money market
(d) Stock market
Answer: (c)
