Corrective action against Central Bank is an alert, no obstruction: RBI
15 June 2017
The Reserve Bank of India has pulled up the media, including social media for some misinformed communication circulating in some sections about the prompt corrective action (PCA) taken against Central Bank of India.
The report that the RBI has put Central Bank of India under prompt corrective action in view of high net non-performing assets caused the bank's scrip lose 2.41 per cent and trade at Rs99.20 at 9:20 IST on BSE.
The Reserve Bank of India has clarified that the PCA framework is not intended to constrain normal operations of the banks for the general public as is made out in certain media reports. It further clarified that the central bank, under its supervisory framework, uses various measures/tools to maintain sound financial health of banks.
''PCA framework is one of such supervisory tools, which involves monitoring of certain performance indicators of the banks as an early warning exercise and is initiated once such thresholds as relating to capital, asset quality etc are breached. Its objective is to facilitate the banks to take corrective measures, including those prescribed by the Reserve Bank, in a timely manner, in order to restore their financial health,'' RBI pointed out.
''The framework also provides an opportunity to the Reserve Bank to pay focused attention on such banks by engaging with the management more closely in those areas. The PCA framework is, thus, intended to encourage banks to eschew certain riskier activities and focus on conserving capital so that their balance sheets can become stronger,' it added.
The Reserve Bank has emphasised that the PCA framework has been in operation since December 2002 and the guidelines issued on 13 April 2017 is only a revised version of the earlier framework.