RBI may soon make their way out from the PCA framework

The Reserve Bank of India may soon leave the Prompt Corrective Action (PCA) framework of the RBI, as there is a boost in the financial health of the bank. RBI is the only public sector bank under PCA till date. The bank has made its depiction to RBI and portrayed continued betterment in financial health for the last five quarters. The Central Bank is currently working the bank’s request and will take a resolution soon based on qualitative and quantitative factors. The Central Bank of India declared a ₹234.78 crore profit in the first financial quarter. The profit increased by 14.2% as compared to ₹205.58 crore in the same quarter of the forgoing year.

The bank’s gross Non-Performing Assets (NPAs) also sinked from 15.92% to 14.9% in the current quarter. Net NPAs also decreased from 5.09% to 3.93% in the first quarter.

The PCA framework was applicable to RBI in the month of June 2017 as a result of its high net non-performing assets (NPAs) and low Return on Assets. Indian Overseas Bank and UCO Bank, are one of the PSU lenders under the RBI’s supervision, were disconnected from the framework in September of 2021. PCA was launched when banks were unable to meet specific regulatory requirements, like minimum capital, return on asset and the amount of non-performing assets, including lending, management compensation, and directors’ fees.

The lender under PCA will experience some restrictions such as dividend distribution, branch expansion and management compensation or may need promoters to infuse capital in the bank.

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