What is PCA ?
What is PCA?
- PCA stands for Prompt Corrective Action.
- It generally restricts lending activities of the banks.
- The RBI had come out with a more stringent PCA framework in April 2017 to turn around lenders with weak operational and financial metrics.
- Banks under this framework are restricted from opening new branches, staff recruitment and increasing the size of their loan book depending on the risk thresholds set in PCA rules.
- Apart from these, banks are directed to disburse loans only to those companies whose borrowing is above investment grades.
- The RBI enforces these guidelines to ensure banks do not go bust and follow prompt measures to put their house in order.