PCA Rules

Bad loans in some NBFCs will definitely rise but no one should complain. They are no longer shadow banks

According to RBI data for January 2021, while there were 9,507 NBFCs, only 64 were deposit-taking (NBFC-D)

The PCA being extended to NBFCs may prove to be a good decision for the long-term as it will encourage good practises and is also expected to improve governance

There are about 10,000 NBFCs registered with the RBI, but only a few that can potentially face these PCA restrictions

PCA will be activated for large NBFCs once their capital adequacy falls by 300 bps, or net NPA ratio rises above 6%

Central Bank in its annual report for 2020-21 said it was complying with the PCA framework norms meticulously

The Kolkata-based lender was placed under PCA in May 2017 on account of high net NPAs and negative RoA

The bank is also looking to grow its Rs 45,000 crore corporate book by about 10 per cent.

On the liabilities side, these entities have made efforts to increase the share of low-cost money in current and savings accounts

The government's shareholding in the lender is 47.11 per cent, while LIC holds 51 per cent in it

Private sector Dhanlaxmi Bank too has been taken out of the Prompt Corrective Action (PCA) Framework

Though capital adequacy and net NPAs will improve, banks will need more capital to expand

Banks' net non-performing loan (NPL) ratios and capital -- two of the four parameters that the RBI tracks as part of the PCA framework -- improved significantly in the quarter ended Dec 2018, it said

The 11 public sector banks that are under the prompt corrective action (PCA) framework have shown lower growth in gross non-performing assets as against non-PCA banks, the Reserve Bank said in a report Friday. Of the 21 state-owned banks, as many as 11 are under the PCA framework, which imposes lending and other restrictions on weak lenders. These 11 banks constitute a fifth of the system-wide credit and deposits. These are Allahabad Bank, United Bank, Corporation Bank, IDBI Bank, Uco Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Dena Bank and Bank of Maharashtra. The PCA banks have also increased recoveries, while containing the growth in advances and deposits, reducing riskiness of assets and focusing on better rated assets. "The PCA banks have also shown lower growth in GNPAs, relative to non-PCA state-run lenders," the report on the 'Trends & Progress of Banking in 2017-18', said. The report said various restrictions

Among the current crop of 11 banks under the PCA, the first to fall in line was United Bank of India in early 2014

High level of bad loans and dearth of capital lower lending capacity for banks, say experts

The RBI had proposed revising the revised PCA framework to the Ministry of Finance in September 2016

As many as 11 out of 21 banks are under the RBI's watchlist. Of these, two banks, Dena Bank and Allahabad Bank, are facing restrictions on expansion of business

Govt to pitch for alignment of PCA provisions with globally accepted Basel norms

Without the PCA imposition, he said some banks would have incurred even higher losses and required even more of taxpayer money for recapitalisation