The Reserve Bank of India Deputy Governor Viral Achraya said on Friday that the performance of banks that are under the prompt corrective action (PCA) are improving and hence, such corrective measures should be persisted with.
In a speech at the Indian Institute of Technology, Bombay, the Deputy Governor said the PCA framework is essential for financial stability.
Restrictions imposed
The PCA framework of the RBI is about imposing certain restrictions on expansion of branches and dividend distribution by banks that are financially weak as reflected in parameters like non-performing asset ratio and return on assets.
“There are emerging signs that the performance of banks under PCA is slowly but steadily being restored,” Mr. Acharya said.
At present, there are 12 banks, 11 in the public sector and one in the private sector, under the PCA framework.
The shares of these banks in advances and deposits as on March 31, 2018 was 18.5% and 20.8% respectively.
Citing data from the 11 public sector banks that are under PCA, Mr. Acharya said the declining trend of capital adequacy ratio and tier-1 capital ratio of these banks, that started in 2011, has been arrested.