RBI may allow some banks out of PCA framework: Report

The Reserve Bank of India (RBI) may consider letting some banks out of the Prompt Corrective Action (PCA) framework, according to a report by CNBC-TV18.

Banks with declining net non-performing assets or those that can be merged with larger entities may be considered to be kept out of PCA.

Among other measures, the RBI may allow banks to include expected income from Insolvency and Bankruptcy Code (IBC) cases on their books by applying easier restructuring of the debt in the Small and medium enterprises (SMEs) segment.

The Centre may also drop its demand to ask RBI to transfer its capital and a special window to extend a line of credit to non-banking financial corporations (NBFCs), the report said, adding both sides are said to be trying hard to avoid any resignation.

Governor Patel is said to have met PM Modi on November 9 to discuss flash points to iron out the differences. They are believed to have agreed on providing a special dispensation for SMEs.

In its recent rift with RBI, the government had demanded a relaxation in PCA norms for banks, so they can lend more. The Finance Ministry wrote to the central bank over invoking Section 7 of the Banking Regulation Act, which states that directions can be issued to RBI.

The PCA action was initiated against 11 public sector banks, with their shares of advances and deposits as at March-end being 18.5 percent and 20.8 percent, respectively.

Sources told the channel that Punjab National Bank is not a part of the list and some other banks will also be out soon.