Economics • Banking & FinanceMedium
Under the Prompt Corrective Action (PCA) framework for banks, which of the following triggers is typically evaluated?
A. Capital to Risk-Weighted Assets Ratio (CRAR), Net Non-Performing Assets (NPA), and Leverage Ratio✓ Correct Answer
B. Foreign exchange reserves and export credit volume
C. Total agricultural lending portfolio and gold loan share
D. Number of rural branches opened in unbanked areas
💡 Solution & Explanation
The Prompt Corrective Action framework administered by the Reserve Bank of India evaluates troubled commercial banks based on objective risk thresholds involving Capital to Risk-Weighted Assets Ratio, Net Non-Performing Assets, and Tier-1 Leverage Ratios. When banks breach these specified regulatory triggers, corrective restrictions are imposed on their operations. Distractors involving export volumes or agricultural lending targets do not constitute core PCA evaluation parameters.
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