Economics • Banking & FinanceMedium
What does the term 'Prompt Corrective Action (PCA)' framework implemented by the Reserve Bank of India entail for commercial banks?
A. It imposes mandatory liquidation on banks that fail to meet agricultural lending targets.
B. It places supervisory restrictions and monitors banks that breach critical thresholds regarding capital adequacy, asset quality, and profitability.✓ Correct Answer
C. It provides immediate government bailouts and equity infusion for failing non-banking financial companies.
D. It dictates the maximum interest rates that commercial banks can charge on retail loans.
💡 Solution & Explanation
The Prompt Corrective Action framework enables the Reserve Bank of India to enforce structured supervisory interventions and operational restrictions on commercial banks breaching critical financial health thresholds. Other choices incorrectly describe agricultural lending mandates, housing finance policies, or non-banking financial company bailout procedures.
More Economics Banking & Finance questions
- What is the primary function of the 'Collateralized Borrowing and Lending Obligation (CBLO)' or its modern…
- In the context of the Indian banking system, what does the acronym 'NEFT' stand for?
- What is the primary operational mechanism of the 'Marginal Standing Facility' introduced by the Reserve Bank…
- What does the term 'Base Rate' signify in the context of Indian banking lending rates prior to the…
- Which of the following facilities allows scheduled commercial banks to dip below the Statutory Liquidity…