More rules, less discretion?

Provisioning norms in India are strictly rule-based. Being more conservative helps in withstanding crisis and enables timely corrective measures

There is a public debate regarding relaxation of the Prompt Corrective Action (PCA) norms imposed on 11 public sector banks (PSBs). The PCA framework is employed internationally by regulators as a form of structured early-intervention and resolution mechanism, designed to help banks regain health by preserving capital.

In India, the Reserve Bank of India’s PCA framework was introduced in December 2002 along the lines of the the Federal Deposit Insurance Corporation’s (FDIC) PCA framework and was implemented with respect to bank financials on March 31, 2017. In the US, the PCA framework is based more on constrained discretion rules that are