Economics • Banking & FinanceHard
What is the primary objective of introducing 'Prompt Corrective Action' frameworks for weak banks by the Reserve Bank of India?
A. To liquidate defaulting institutions and liquidate their assets within ninety days
B. To monitor financial health indicators like capital, asset quality, and profitability and intervene early✓ Correct Answer
C. To nationalize private scheduled banks facing temporary litigation challenges
D. To merge regional rural banks directly with apex cooperative credit societies
💡 Solution & Explanation
Prompt Corrective Action allows the central bank to intervene early when commercial banks breach specified thresholds regarding capital adequacy, non-performing assets, and profitability to restore financial health. Liquidation is an extreme last resort rather than the primary goal of early intervention. Nationalization policies belong to historical banking reforms rather than regulatory PCA triggers. Supervisory oversight aims to enforce corrective operational plans before systemic failure occurs.
More Economics Banking & Finance questions
- Under the Basel III international regulatory framework, what does the 'Liquidity Coverage Ratio' (LCR)…
- Analyze the role of the 'Collateralized Borrowing and Obligation Repo (CBLO)' segment, now replaced by…
- What structural role does the 'Marginal Standing Facility' play within the liquidity management framework of…
- What structural challenge historically explains why certain backward rural districts in southern Haryana…
- Which entity regulates and supervises Housing Finance Companies (HFCs) in India?