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Context: Recently, Reserve Bank of India (RBI) has decided to put in place a prompt corrective action (PCA) framework for troubled non-banking finance companies to restore their financial health.
What is the PCA framework?
When was PCA introduced?
Objective: Prompt Corrective Action or PCA is a framework under which financial institutions with weak financial metrics are put under watch by the RBI.
Applicability: The PCA framework for NBFCs comes into effect from October 1, 2022, based on their financial position on or after March 31, 2022.
Implications - This is a welcome move as it will stop bad lenders from going worse rather than brushing the issue aside.
What are the tracking indicators?
The central bank will track three indicators
In the case of core investment companies (CICs), the RBI will track
A breach in any of the three risk thresholds under the above mentioned indicators could result in invocation of PCA.
Significance of PCA
By: Shubham Tiwari ProfileResourcesReport error
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