The Reserve Bank of India (RBI) on July 26 issued Prompt Corrective Action (PCA) framework for Primary (Urban) Co-operative Banks.
The Reserve Bank had issued a Supervisory Action Framework (SAF) as an early intervention tool for bringing about desired improvements in weak UCBs and UCBs which are experiencing financial stress, the RBI said.
The SAF was last revised vide RBI Circular dated January 6, 20201. This PCA framework shall replace the SAF.
The framework has been suitably harmonised with similar frameworks applicable for Scheduled Commercial Banks and Non-Banking Financial
Companies, with suitable modifications keeping in mind the underlyingprinciple of proportionality, the RBI said.
The PCA framework is largely principle-based with fewer number of parameters as compared to the SAF, without any dilution in the supervisory
rigour and the revised framework seeks to provide flexibility to design entity specific supervisory action plans based on the assessment of risks on a case-by-case basis, the RBI said.
The hard-coded limit of Rs 25,000/- for restrictions on capital expenditure by UCBs under SAF has been dispensed with. The revised framework enables
the Supervisors to decide the limit depending upon their assessment of each entity, the RBI said.
The PCA Framework has been made applicable to all2 UCBs in Tier 2, Tier 3 and Tier 4, except UCBs under All Inclusive Directions (AID), the RBI said.
Further, Tier 1 UCBs have been excluded from the PCA framework for the present. However, they shall continue to be subjected to enhanced monitoring under the extant supervisory framework.
The revised framework is expected to give more focus on the larger UCBs requiring more intensive monitoring by optimal utilisation of supervisory
resources, the RBI said.