The Reserve Bank of India (RBI) has on Friday issued a new prompt corrective action (PCA) framework for urban cooperative banks (UCBs) to enable supervisory intervention at an appropriate time, and the same will be effective from April 2025.
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 apex bank , the banking regulator, said.
The objective of the framework is to enable supervisory intervention at appropriate time and require UCBs to initiate and implement remedial measures in a timely manner, to restore their financial health.
The RBI had issued a supervisory action framework (SAF) as an early intervention tool for bringing about desired improvements in weak UCBs or those experiencing financial stress. The SAF was last revised in January 2020.
“The PCA framework shall replace the SAF,” the RBI said, adding the revised framework will provide flexibility to design entity specific supervisory action plans based on the assessment of risks on a case-by-case basis.
“The framework has been suitably harmonised with similar frameworks applicable for commercial banks and non-banks, with suitable modifications keeping in mind the underlying principle of proportionality,” it said, adding that the PCA framework is largely principle-based with fewer number of parameters compared to the SAF, without any dilution in the supervisory rigour.
“The revised framework is expected to give more focus on larger UCBs requiring more intensive monitoring by optimal utilisation of supervisory resources,” it said, adding capital, asset quality and profitability will be the key areas for monitoring in the revised framework.
