RBI’s Revised PCA framework

• Reserve Bank of India (RBI) modified its prompt corrective action (PCA) framework on November 3, 2021 to exclude the profitability parameter from its triggers list.

• In its 2017 framework, capital, asset quality & profitability were the key areas to monitor.

• In recent modification, round capital, asset quality & leverage will be key areas.

• RBI has also modified the level of shortfall in total capital adequacy ratio. It will push the lender to “risk threshold three” category. Lenders who breach this risk threshold, will be placed under stringent PCA restrictions.