Under the Prompt Corrective Action (PCA) framework administered by the Reserve Bank of India, which financial parameters trigger supervisory intervention for weak commercial banks?

💡 Solution & Explanation

The prompt corrective action framework monitors specific financial thresholds relating to capital adequacy measured by capital to risk-weighted assets ratio, asset quality through net non-performing asset levels, and profitability or leverage ratios. Breaching these regulatory thresholds triggers mandatory and discretionary supervisory restrictions on dividend distribution, branch expansion, and risky lending. This mechanism allows the central bank to intervene early and restore financial health before insolvency occurs. It applies to all banks operating in India including foreign banks under specific conditions.