Economics • Banking & FinanceMedium
What is the primary purpose of introducing 'Prompt Corrective Action (PCA)' framework by the Reserve Bank of India?
A. To enable weak and financially stressed banks to restructure their loans without regulatory oversight.
B. To monitor key parameters like capital adequacy, asset quality, and profitability of commercial banks and initiate remedial measures early.✓ Correct Answer
C. To take over failing cooperative banks and merge them directly with foreign institutional investors.
D. To regulate digital wallet transactions and mobile banking applications.
💡 Solution & Explanation
The Prompt Corrective Action framework enables the Reserve Bank of India to monitor critical parameters like capital adequacy, asset quality, and profitability, intervening early to restore financial health in stressed banks. Options suggesting unregulated loan restructuring or merging cooperative banks with foreign investors are factually incorrect. The PCA framework is a vital regulatory tool under Indian banking regulations for UPSC and banking exams.
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