Prompt Corrective Action (PCA) Framework

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Prompt Corrective Action (PCA) Framework

Prompt Corrective Action (PCA) Framework

PCA stands for Prompt Corrective Action. After the financial results of the banks in 2017-18, the government formed a committee to restructure the assets of these banks. Apart from this, 11 out of 21 public sector banks are under the purview of PCA due to rising losses and sinking debt. Prompt Corrective Action is a US federal law mandating progressive penalties against banks that exhibit progressively deteriorating capital ratios.

After coming under the purview of this framework-
  • These banks cannot extend branch.
  • RBI can prevent them from making dividend payment.
  • Many conditions can be imposed by RBI even if these banks give loans.
  • The Reserve Bank of India can take action to consolidate, reorganize and close these banks.
  • RBI may impose restrictions on management compensation and directors fees of these banks.



Bank of Baroda

  • Total loss of 3102.34 crores in the quarter from January to March (2018).
  • The bank's NPA increased by 190% compared to the quarter of 2017-18.



IDBI

  • Total loss of 566.76 crores in the quarter from January to March (2018).
  • The bank's NPA increased by 28% compared to the quarter of 2017-18.
  • In these banks, except the Bank of Baroda, the remaining three banks are in the PCA Framework of RBI.
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