- The Reserve Bank of India (RBI) have allowed three public sector banks to exit the PCA framework following capital infusion by the government and a decline in net non-performing asset (NPA) ratio.
- To ensure that banks don’t go bust, RBI has put in place some threshold levels to assess, monitor, control and take corrective actions on banks which are weak and troubled.This process is known as Prompt Corrective Action or PCA.
- There are three risk thresholds which are based on certain levels of asset quality, profitability, capital and net non performing assets(NPA’s) ratio which should not cross 6%.
- This decision will give boost to the credit growth in the MSME and agricultural sector.
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