New Delhi, December 14, 2018 : .The Reserve Bank of India introduced Tuesday the prompt corrective (PCA), framework for nonbanking financial corporations (NBFCs).
It will be in effect starting October 1, 2022 based on the financial situation of NBFCs as of March 31, 2022.The central bank stated that NBFCs are growing in number and interconnected with many other parts of the financial sector.
The central bank stated that it was now decided to establish a PCA Framework to assist NBFCs in strengthening the supervision tools.
After three years, the PCA Framework is being reviewed.
This measure applies to all deposit-taking NBFCs, except government companies, and all non-deposit-taking NBFCs located in the ‘Middle Upper’ or ‘Top Layers’.
The PCA Framework would monitor both non-deposit and deposit taking NBFCs in the areas of capital and asset quality.
For CICs (core investment company), capital, leverage and asset quality would be the key areas for monitoring under the framework.
“For ‘NBFCs-D’ and ‘NBFCs-ND’, indicators to be tracked would be Capital to Risk Weighted Assets Ratio (CRAR), Tier I Capital Ratio and Net NPA Ratio (NNPA).For CICs, indicators to be tracked would be ‘Adjusted Net Worth or Aggregate Risk Weighted Assets’, ‘Leverage Ratio’ and ‘NNPA’,” the RBI said.
NBFC will generally be placed under PCA Framework based on the audited Annual Financial Results or the Supervisory Assessment made by the RBI.However, the central bank may impose PCA on any NBFC during the course of a year in case the circumstances warrant, it added.
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