world focus magazine

world focus magazine

world focus magazine Published this article page no   97 Infusion of Rs.3.17 lakh crore by the Government and Mobilisation of over Rs. 2.49 lakh crore by the banks themselves etc. Domestic Systemically Important Banks (DSIBs) DSIBs are the banks considered as too big to fail by RBI due to their size crossjurisdictional activities complexity and lack of substitute and interconnection. Banks whose assets exceed 2% of GDP are considered part of this group such as SBI ICICI Bank HDFC Bank continues to remain DSIB. As per the framework from 2015 the central bank has to disclose names of banks designated as DSIB. PROMPT CORRECTIVE ACTION (PCA) Why in news? Recently RBI issued revised norms for commercial banks that are to be placed under the Prompt Corrective Action (PCA) framework with effect from January 1 2022. More on News RBI has also issued Prompt Corrective Action (PCA) Framework for NonBanking Financial Companies (NBFCs) to tighten regulation over weaker NBFCs. It will cover All Deposit Taking NBFCs [NBFCsD Excluding Government Companies] All NonDeposit Taking NBFCs in Middle Upper and Top Layers (NBFCsND) including Core Investment Companies (CICs) [Excluding  (i) NBFCs not acceptingnot intending to accept public funds (ii) Government Companies (iii) Primary Dealers and (iv) Housing Finance Companies]. About PCA PCA is a framework under which financial institutions usually banks and now NBFCs as well with weak financial metrics are put under watch by the RBI. It was first introduced in 2002 as a structured earlyintervention mechanism for banks that become under capitalised due to poor asset quality or vulnerable due to loss of profitability. It was last reviewed in 2017 based on the recommendations of the Financial Stability and Development Council and the Financial Sector Legislative Reforms Commission. Important changes in the PCA Framework for Banks Parameters Three parameters Capital Asset Quality and Leverage to be monitored under the revised framework with three risk thresholds from 1 to 3 in the increasing order of severity. o The revised framework has removed return on assets as an indicator. Applicability To apply on all banks operating in India including foreign banks operating through branches or subsidiaries based on breach of risk thresholds of identified indicators. o However payments banks and small finance banks (SFBs) have been removed from the list of lenders where prompt corrective action can be initiated. Entry PCA Framework will apply based on the Audited Annual Financial Results and the ongoing Supervisory Assessment made by RBI or if circumstances so warrant. Exit Based on the Supervisory comfort of RBI and no breaches in risk thresholds in any of the parameters for four continuous quarterly financial statements one of which should be Audited Annual Financial Statement (subject to assessment by RBI) Corrective actions prescribed after a bank or NBFC is placed under PCA Mandatory and Discretionary actions by RBI Specifications Mandatory actions Discretionary actions Risk Threshold 1 Restriction on dividend distributionremittance of profits. PromotersOwnersParent (in the case of foreign banks) to bring in capital. Restriction on issue of guarantees or taking on other contingent liabilities on behalf of group companies (only for CICs) Special Supervisory Actions Strategy related Governance related Capital related Credit risk related Market risk related HR related Profitability related OperationsBusiness related Any other Risk Threshold 2 In addition to mandatory actions of Threshold 1 Restriction on branch expansion domestic andor overseas Risk Threshold 3 In addition to mandatory actions of Threshold 1 & 2 Appropriate restrictions on capital expenditure other than for technological upgradation within Board approved limits world focus magazine buy.

world focus magazine