The Reserve Bank of India (RBI) on December 14 released the Prompt Corrective Action (PCA) framework for Non-Banking Finance Companies (NBFCs) by introducing three risk limit categories. “NBFCs are growing in size and have substantial inter-linkages with other sectors of the financial system. Accordingly, a PCA framework for NBFCs has also been put in place to further strengthen the supervisory instruments applicable to NBFCs,” RBI said.
This framework will be applicable to all deposit-taking NBFCs, except government companies, all non-deposit taking NBFCs in the middle, upper and top layers, the RBI said.
RBI said that the PCA framework for NBFCs will be effective from October 1, 2022, on or after March 31, 2022, depending on the financial position of the NBFC.
The regulator said the RBI will impose PCA on NBFCs if any exposure limits are breached. “For NBFC-D and NBFC-ND, capital and asset quality will be the key areas to monitor in the PCA framework. For core investment companies, capital, leverage and asset quality will be key areas to monitor in the PCA framework,” RBI said.
“For NBFC-D and NBFC-ND, the indicators to be tracked will be Capital to Risk Weighted Assets Ratio (CRAR), Tier I Capital Ratio and Net NPA Ratio (NNPA). For CIC, the indicators to be tracked would be adjusted net worth/total risk weighted assets, leverage ratio and NNPA, RBI further mentioned.
RBI will then impose restrictions on various business operations and conduct specific inspections and targeted investigations of the company. The PCA framework will be reviewed after three years of operation.
read all breaking news, today’s fresh news And coronavirus news Here.
,