Economics • Banking & FinanceMedium
Under the Prompt Corrective Action (PCA) framework of the Reserve Bank of India, which of the following is typically restricted first for a troubled bank?
A. Distribution of dividends and expansion of branch networks✓ Correct Answer
B. Collection of retail savings deposits and current account balances
C. Issuance of statutory liquidity ratio (SLR) eligible bonds
D. Participation in the interbank call money market
💡 Solution & Explanation
Under the Prompt Corrective Action framework, the Reserve Bank of India restricts troubled banks from distributing dividends and expanding their branch networks to preserve capital. Other severe restrictions like limits on lending and core operations follow if financial health deteriorates further. The framework acts as an early intervention mechanism for weak commercial banks.
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