RBI Introduces New PCA Framework For Urban Co-Operative Banks
Date
7/27/2024 2:26:56 PM
(MENAFN- KNN India)
New Delhi, Jul 27 (KNN)
The Reserve bank of India (RBI) has introduced a new Prompt Corrective Action (PCA) framework for primary urban co-operative banks (UCBs), replacing the existing Supervisory Action Framework (SAF).
This change, announced in a circular on Friday, aims to enhance monitoring of larger UCBs and optimize the use of supervisory resources.
The new PCA framework applies to UCBs in Tier 2, Tier 3, and Tier 4 categories, excluding those under All Inclusive Directions (AID).
Tier 1 UCBs are currently exempt from the framework but will remain under enhanced monitoring.
This principle-based framework features fewer parameters than the SAF while maintaining supervisory rigor, allowing for more flexible, case-by-case supervisory action plans based on risk assessment.
In aligning the framework with similar regulations for scheduled commercial banks and non-banking financial companies, the RBI has made modifications to ensure proportionality.
A notable change is the removal of the previous hard limit of Rs 25,000 for capital expenditure restrictions, allowing supervisors to set limits based on individual entity assessments.
The RBI states that this revised framework provides greater flexibility in addressing risks while focusing on larger UCBs requiring more intensive supervision.
This development marks a significant shift in the regulatory approach to urban co-operative banks in India, aiming to strengthen the financial stability of these institutions.
(KNN Bureau)
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