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.