RBI introduces tough PCA framework for large NBFCs, effective October 2022

An NBFC under the framework, caused by triggering the first threshold, will face restrictions on dividend distribution and promoters will be asked to infuse capital and reduce leverage

The Reserve Bank of India (RBI) on Tuesday introduced a prompt corrective action (PCA) framework for large non-banking financial companies (NBFCs), putting restrictions on para-banks whenever vital financial metrics dip below the prescribed threshold.

This brings them almost on a par with banks in terms of supervision and regulatory reach. This follows the scale-based regulations and revision in non-performing asset (NPA) norms brought in by the regulator for the sector.

The PCA framework for NBFCs comes into effect on October 1 next year on the basis of their financial position on or after March 31. It will