Violation of which of the following parameters beyond the limits prescribed by RBI would invoke the ...........

Economic Affairs Types of Banks and Banking

Violation of which of the following parameters beyond the limits prescribed by RBI would invoke the Prompt Corrective Action?

1. Capital to weighted assets ratio

2. Net Non-Performing Assets

3. Return on Assets

4. Capital Adequacy Ratio

5. Cash Reserve Ratio

6. Statutory Liquidity Ratio

Select the correct answer using the codes given below

1, 2, 3, 4, 5 and 6

1, 2, 3, 4 and 5

1, 2, 3 and 4

1, 2 and 3

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Explanation:

Fourth option is correct.

The Prompt Corrective Action is invoked by RBI on any bank that falters on capital to weighted assets ratio, net non-performing assets, return on assets.

Prompt Corrective Action (PCA)-

PCA is a framework under which banks with weak financial metrics are put under watch by the RBI.
The RBI introduced the PCA framework in 2002 as a structured early-intervention mechanism for banks that become undercapitalised due to poor asset quality, or vulnerable due to loss of profitability.
It aims to check the problem of Non-Performing Assets (NPAs) in the Indian banking sector.
The framework was reviewed in 2017 based on the recommendations of the working group of the Financial Stability and Development Council on Resolution Regimes for Financial Institutions in India and the Financial Sector Legislative Reforms Commission.