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.