The government can infuse Rs 14,500 crore in the next few days in the three banks included in the PCA framework. Currently, Indian Overseas Bank, Central Bank of India and UCO Bank are subject to the ban of PCA rules.
The Ministry of Finance (Finance Ministry) has taken a major decision to improve the financial health of the weak banks under the ‘Prompt Corrective Action’ (PCA) framework of the Reserve Bank of India (RBI). The government can infuse Rs 14,500 crore in the next few days in these banks included in the PCA framework. Currently, Indian Overseas Bank, Central Bank of India and UCO Bank are subject to the ban of PCA rules. There is a ban on giving loans on these, increase in salary and allowances of managers and fees of directors.
Sources said that the ministry has identified banks to give capital. The capital will be poured in the next few days. This will benefit the banks which are under the Immediate Corrective Action Framework (PCA). This week, IDBI Bank (IDBI Bank), controlled by the Life Insurance Corporation of India (LIC), was relieved of the PCA Framework of RBI after nearly four years on the basis of improving financial performance.
What is Prompt Corrective Action Framework
Let us tell you that banks are caught in financial crisis many times while doing business. From time to time, the RBI issues guidelines and frameworks to get them out of the crisis. ‘Prompt Corrective Action’ is a similar framework, which determines the financial health of a bank. This framework has been in operation since December 2002 with changes from time to time.
Government allocated 20 thousand crores
The government has allocated Rs 20,000 crore of capital for the current financial year to meet regulatory requirements in public sector banks. Of the 12 public sector banks, Punjab & Sind Bank (Punjab & Sind Bank) infused capital of Rs 5,500 crore in November last year.
IDBI Bank exits PCA
This week, the RBI removed IDBI Bank from the ‘Prompt Corrective Action’ (PCA) framework. Due to deteriorating financial situation, the RBI (RBI) put IDBI Bank in the PCA framework in May 2017. In March 2017, the NPA of the bank exceeded 13 per cent.
The RBI said, it was noted that as per the results for the quarter ended December 31, 2020, the bank has not violated PCA norms on Regulatory Capital, Net NPA and Leverage Ratio.