The Reserve Bank of India has introduced a new Prompt Corrective Action (PCA) Framework for Urban Co-operative Banks (UCBs).
Key Highlights of the Prompt Corrective Action (PCA) Framework for UCBs:
- The PCA framework will replace the existing Supervisory Action Framework (SAF), which was last revised on January 2020.
- Objective: Enhances the financial health of UCBs with greater precision and flexibility.
- It aligns with frameworks used for scheduled commercial banks and non-banking financial companies, tailored to reflect proportionality and entity-specific needs.
- Application: Applies to all UCBs in tier 2, tier 3, and tier 4 categories, excluding those under All Inclusive Directions (AID).
- Tier 1 UCBs are currently excluded but will remain under enhanced monitoring.
- Key Areas for Monitoring: Focuses on the capital, asset quality, and profitability of UCBs.
- UCBs deemed financially unsound or poorly managed may be placed under PCA upon breaching risk thresholds.
- Exiting PCA and lifting restrictions is possible if no breaches in risk thresholds are noted across four successive quarterly financial statements.
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Frequently Asked Questions (FAQs)
What is the main objective of the new PCA Framework for UCBs?
The main objective is to enhance the financial health of UCBs with greater precision and flexibility.
Which UCB categories does the PCA framework apply to?
It applies to all UCBs in tier 2, tier 3, and tier 4 categories, excluding those under All Inclusive Directions (AID).
What are the key areas for monitoring under the PCA framework?
The key areas for monitoring are capital, asset quality, and profitability of UCBs.