Economics • Banking & FinanceEasy
What is the primary function of the 'Prompt Corrective Action (PCA)' framework implemented by the Reserve Bank of India?
A. To bail out failing non-banking financial companies with government funds
B. To enable weaker banks to restore financial health through regulatory watch and monitoring✓ Correct Answer
C. To merge all regional rural banks into public sector commercial banks
D. To set the statutory liquidity ratio for scheduled commercial banks
💡 Solution & Explanation
The Prompt Corrective Action framework allows the Reserve Bank of India to place weak commercial banks under regulatory monitoring when they breach critical thresholds relating to capital adequacy, asset quality, and profitability. It imposes mandatory and discretionary restrictions on dividend distribution, branch expansion, and risky lending to help institutions recover financial stability. This preemptive supervisory tool aims to safeguard depositors' interests and maintain systemic banking sector resilience.
More Economics Banking & Finance questions
- Which of the following institutions in India is legally mandated to operate and maintain the Central Fraud…
- What is the primary operational objective of the 'Bharat Interface for Money (BHIM)' application?
- Which statutory body in India regulates and supervises Housing Finance Companies (HFCs)?
- Under the regulatory framework of the Reserve Bank of India, what is a 'Certificate of Deposit (CD)'?
- Under the regulatory framework of the Reserve Bank of India, what is the primary role of the 'Standing…