Economics • Banking & FinanceHard
Examine the Prompt Corrective Action framework administered by the Reserve Bank of India for supervised financial institutions. Which specific financial parameters serve as core triggers for supervisory intervention?
A. Capital to Risk-Weighted Assets Ratio, Net Non-Performing Asset ratio, and Leverage Ratio✓ Correct Answer
B. Total agricultural lending volume, rural branch density, and priority sector lending shortfalls
C. Foreign exchange turnover, export credit disbursement, and merchant banking fee income
D. Employee pension liabilities, branch expansion approvals, and digital transaction volumes
💡 Solution & Explanation
The Prompt Corrective Action framework monitors weak commercial banks based on key risk parameters including Capital to Risk-Weighted Assets Ratio, Net Non-Performing Asset ratios, and Tier 1 leverage ratios. When these parameters breach predefined risk thresholds, the central bank imposes mandatory and discretionary corrective restrictions on dividend distribution, branch expansion, and credit growth. This mechanism prevents bank failures by forcing early corrective governance.
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