Question

Q. Which of the following indicators are used for Prompt corrective action by RBI

Select the correct answer using the code given below.

• A. 1 and 2 only
• B. 1, 4 and 4 only
• C. 1, 2 and 5 only
• D. 1, 2 and 4 only

Answer 1

The correct option is D 1, 2 and 4 only

Explanation:

• Prompt Corrective Action (PCA) is a framework in which banks with weak financial records are placed under the supervision of the Reserve Bank of India.
• The PCA framework allows a regulator to place specific restrictions like stopping the payment of dividends or setting up new bank ranches. It also gives powers to place a cap on a bank’s lending limit to one sector. Other corrective actions are as follows: Special audits, Restructuring operations, Activation of a recovery plan, Superseding the banks board of directors, bringing in new management.
• Indicators to be tracked for Capital, Asset Quality and Leverage are CRAR/ Common Equity Tier I Ratio, Net NPA Ratio and Tier I Leverage Ratio respectively.