Economics • Banking & FinanceMedium
What does the term 'Prompt Corrective Action (PCA)' framework implemented by the RBI entail for scheduled commercial banks?
A. Immediate nationalization of any bank experiencing customer deposit runs
B. Regulatory intervention and imposition of operational restrictions on banks that breach prescribed thresholds for capital, asset quality, and profitability✓ Correct Answer
C. Mandatory merger of rural regional banks with public sector commercial banks
D. Automatic infusion of government equity capital whenever a bank reports quarterly losses
💡 Solution & Explanation
The Prompt Corrective Action framework empowers the RBI to impose regulatory restrictions and corrective operational interventions on commercial banks that breach critical thresholds for capital, asset quality, and profitability. It aims to arrest financial deterioration early without resorting to immediate bank nationalization. Banking regulatory frameworks are core topics in Indian economy syllabi.
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