3 Point Analysis | Should RBI heed to govt on easier PCA norms?

While the RBI has been maintaining for long that PCA framework is needed to nurture weak banks to health and prevent systemic risks, of late government has been critical of RBI’s approach.

Prompt Corrective Action framework of the RBI thus has turned out to be a contentious issue between the two and finally a truce was arrived at in yesterday’s Board Meeting with RBI willing to take a relook at the PCA norms.

In a nutshell, the trigger for coming under PCA is based on performance with respect to capital position, bad assets, profitability and leverage.

So far eleven banks namely Allahabad Bank, Bank of India, Bank of Maharashtra, Central Bank, Corporation Bank, Dena Bank, IDBI Bank, Indian Overseas Bank, Oriental Bank of Commerce, UCO Bank and United Bank of India are under PCA.

Sakshi Batra does a 3 point analysis on is the time ripe to relax these norms in order to permit greater flow of credit or is it too early?