Mumbai. The Reserve Bank of India (RBI) has released the Prompt Corrective Action (PCA) format for urban cooperative banks. The aim of this initiative is to ensure that appropriate intervention is done at the right time. The provisions of the PCA format for primary (urban) cooperative banks (UCBs) will be effective from April 1, 2025. The issuance of the PCA format means that the RBI can intervene on the concerned financial units at the right time. The purpose of this format is that urban cooperative banks take and implement corrective measures in time so that their financial health can be restored.
The Reserve Bank had issued the Supervisory Action Framework (SAF) as an early intervention tool for necessary reforms in weak urban cooperative banks and UCBs undergoing financial stress. The SAF was last revised in January 2020. This PCA format will now replace the SAF for urban cooperative banks, the RBI said in a statement. The revised framework seeks to bring flexibility to decide specific supervisory action plans for that unit based on the assessment of risks in a case.
RBI said, the PCA framework has been harmonized with the similar framework applicable to scheduled commercial banks and non-banking financial companies. Necessary amendments have been made keeping in mind the underlying principle of proportionate importance. According to the Reserve Bank, the PCA framework is largely principle-based, with no reduction in supervisory rigor despite having fewer criteria than SAF. The revised PCA framework will have special monitoring on the points of capital, asset quality and profitability. This framework will apply to all urban cooperative banks except small UCBs (Tier 1 UCBs). The Reserve Bank has classified urban cooperative banks into four levels for regulatory purposes.
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