Current Affairs Exam > Current Affairs Questions > Consider the following statements:1. The Prom...
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Consider the following statements:
1. The Prompt Corrective Action (PCA) framework enables supervisory intervention of RBI over Banks.
2. The PCA framework applies to all banks operating in India.
Which of the statements given above is/are correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
Consider the following statements:1. The Prompt Corrective Action (PCA...
- The Prompt Corrective Action (PCA) framework enables supervisory intervention of RBI over Banks at an appropriate time and ensures effective market discipline. Hence, statement 1 is correct.
- The framework applies to all banks operating in India, including foreign banks operating through branches or subsidiaries based on breach of risk thresholds of identified indicators. Hence, statement 2 is correct.
- However, payments banks and small finance banks (SFBs) have been removed from the list of lenders where prompt corrective action can be initiated.
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Community Answer
Consider the following statements:1. The Prompt Corrective Action (PCA...
Explanation:
The Prompt Corrective Action (PCA) framework is a supervisory tool used by the Reserve Bank of India (RBI) to ensure that banks maintain adequate capital, manage their risk effectively, and take timely corrective actions to address any deterioration in their financial health. It enables the RBI to intervene in the functioning of banks to prevent them from becoming insolvent or experiencing significant financial distress.
Statement 1: The Prompt Corrective Action (PCA) framework enables supervisory intervention of RBI over Banks.
The first statement is correct. The PCA framework empowers the RBI to take various supervisory actions against banks based on their risk thresholds. These actions can include restrictions on dividend payments, branch expansion, and management compensation, as well as the imposition of additional capital requirements and higher provisions for non-performing assets. The objective of these actions is to improve the financial health and viability of the banks and protect the interests of depositors.
Statement 2: The PCA framework applies to all banks operating in India.
The second statement is also correct. The PCA framework applies to all banks operating in India, including public sector banks, private sector banks, and foreign banks. It is applicable to both scheduled commercial banks and scheduled cooperative banks. The framework is designed to ensure that all banks maintain a strong financial position and adhere to prudential norms to safeguard the stability of the banking system.
Conclusion:
Both statements are correct. The Prompt Corrective Action (PCA) framework enables supervisory intervention of RBI over banks, and it applies to all banks operating in India. This framework plays a crucial role in maintaining the stability and integrity of the banking system by ensuring that banks maintain adequate capital and manage their risks effectively.
The Prompt Corrective Action (PCA) framework is a supervisory tool used by the Reserve Bank of India (RBI) to ensure that banks maintain adequate capital, manage their risk effectively, and take timely corrective actions to address any deterioration in their financial health. It enables the RBI to intervene in the functioning of banks to prevent them from becoming insolvent or experiencing significant financial distress.
Statement 1: The Prompt Corrective Action (PCA) framework enables supervisory intervention of RBI over Banks.
The first statement is correct. The PCA framework empowers the RBI to take various supervisory actions against banks based on their risk thresholds. These actions can include restrictions on dividend payments, branch expansion, and management compensation, as well as the imposition of additional capital requirements and higher provisions for non-performing assets. The objective of these actions is to improve the financial health and viability of the banks and protect the interests of depositors.
Statement 2: The PCA framework applies to all banks operating in India.
The second statement is also correct. The PCA framework applies to all banks operating in India, including public sector banks, private sector banks, and foreign banks. It is applicable to both scheduled commercial banks and scheduled cooperative banks. The framework is designed to ensure that all banks maintain a strong financial position and adhere to prudential norms to safeguard the stability of the banking system.
Conclusion:
Both statements are correct. The Prompt Corrective Action (PCA) framework enables supervisory intervention of RBI over banks, and it applies to all banks operating in India. This framework plays a crucial role in maintaining the stability and integrity of the banking system by ensuring that banks maintain adequate capital and manage their risks effectively.
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Consider the following statements:1. The Prompt Corrective Action (PCA) framework enables supervisory intervention of RBI over Banks.2. The PCA framework applies to all banks operating in India.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?
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