Prompt corrective action on Dena Bank

TNPSC Current Affairs - May 2018 by TNPSC Guru

Reserve Bank of India has initiated prompt corrective action on Dena Bank due to high non-performing loans and restricting not to give fresh loan also not to hire any new personnel.

What is Prompt Corrective Action (PCA). 

• PCA is an RBI System in which it will take corrective action against the Indian Banks when the Bank’s financial conditions worsen below certain limits.
• For this RBI has given certain threshold limit to the banks and RBI will intervene when the banks financial condition worsen below certain limits.
• The limits are based on CRAR (Capital to Risk weighted Asset Ratio), NPA (Net Non-Performing Assets)  and RoA(Return on Assets).
• If the PCA implemented then there will be halting branch expansion, limiting lending limit, stopping dividend payment, audit, restructuring operation and may RBI can supersede banks board.
• In April 2017 RBI has revised its PCA Framework . Till now 10 Indian banks namely  United Bank of India, Bank of India, Central Bank of India,  Bank of Maharashtra, UCO Bank, Corporation Bank, Oriental Bank of Commerce, Dena Bank IDBI Bank and Indian Overseas Bank came under PCA.
• PCA is applicable only for commercial bank , it is not applicable for co-operative banks, non-banking financial companies (NBFCs) and Micro finance Institutions (MFIs).