Prompt Corrective Action (PCA) Framework for Scheduled Commercial Banks & NBFCs

RBI has reviewed & revised the existing PCA Framework for SCBs. The provisions of the revised PCA Framework will be effective from January 1, 2022.

Please click on the following link for : Prompt Corrective Action (PCA) Framework for Scheduled Commercial Banks

The Reserve Bank of India has also issued the Prompt Corrective Action (PCA) Framework for Non-Banking Financial Companies (NBFCs). NBFCs have been growing in size and have substantial inter-connectedness with other segments of the financial system. Accordingly, a PCA Framework for NBFCs has also been put in place to further strengthen the supervisory tools applicable to NBFCs. This shall apply to:

1. All Deposit Taking NBFCs [Excluding Government Companies],
2. All Non-Deposit Taking NBFCs in Middle, Upper and Top Layers
   [Excluding - (i) NBFCs not accepting/not intending to accept public funds; (ii) Government Companies, (iii) Primary Dealers and (iv) Housing Finance Companies].

The PCA Framework for NBFCs shall come into effect from October 1, 2022, based on the financial position of NBFCs on or after March 31, 2022. A separate circular would be issued in due course with regard to applicability of PCA Framework to Government NBFCs.

In terms of extant regulations, Government NBFCs have been provided time upto March 31, 2022 to adhere to the capital adequacy norms provided for NBFCs (Ref. Annex I of Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016). Accordingly, a separate circular would be issued in due course with regard to applicability of PCA Framework to Government NBFCs.

The PCA Framework will be reviewed after three years of being in operation.

Please click on the following link for : Prompt Corrective Action (PCA) Framework for Non-Banking Financial Companies (NBFCs)

The objective of the PCA Framework is to enable Supervisory intervention at 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 PCA Framework is also intended to act as a tool for effective market discipline. The PCA Framework does not preclude the Reserve Bank of India from taking any other action as it deems fit at any time, in addition to the corrective actions prescribed in the Framework.

Source: rbi.org.in