Oriental Bank of Commerce Current Affairs - 2019

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Prompt Corrective Action framework restrictions lifted for Three Banks

The Reserve Bank of India (RBI) has lifted the Prompt Corrective Action (PCA) framework operational curbs on Bank of India (BoI), Bank of Maharashtra (BoM) and Oriental Bank of Commerce (OBC).

These public sector banks are out of the prompt corrective action (PCA) framework. This will aid in making marked improvements in the capital positions and asset quality.

The PCA restrictions were lifted after these banks provided a written commitment that they would comply with the norms of minimum regulatory capital, net NPAs (Non-performing Assets) and leverage ratio on an ongoing basis. These Banks have also apprised RBI of the structural and systemic improvements they have put in place.

Prompt Corrective Action (PCA) Framework

Prompt Corrective Action (PCA) framework has been issued by the RBI to maintain the sound financial health of banks. The RBI will initiate certain structured and discretionary actions for the bank under the PCA when the Banks breach any of the three key regulatory trigger points:

  • Capital to risk-weighted assets ratio
  • Net non-performing assets
  • Return on assets.

The PCA framework is aimed at nudging the banks to take corrective measures in a timely manner, in order to restore their financial health.

Month: Categories: Business, Economy & BankingUPSC

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Relaxation of Norms under PCA Framework

It is said that the finance ministry and the Reserve Bank of India are working on providing some relaxation on the prompt corrective action (PCA) framework for stressed banks.

Prompt Corrective Action (PCA) Framework

Prompt Corrective Action (PCA) framework has been issued by the RBI to maintain the sound financial health of banks. The RBI will initiate certain structured and discretionary actions for the bank under the PCA. The PCA framework kicks in when the Banks breach any of the three key regulatory trigger points

  • Capital to risk-weighted assets ratio
  • Net non-performing assets
  • Return on assets.

The PCA framework is aimed at nudging the banks to take corrective measures in a timely manner, in order to restore their financial health.

Eleven Banks which are under PCA framework are Dena Bank, Central Bank of India, Bank of Maharashtra, UCO Bank, IDBI Bank, Oriental Bank of Commerce, Indian Overseas Bank, Corporation Bank, Bank of India, Allahabad Bank and United Bank of India.

Why there is a proposal for providing relaxation now?

After several measures taken for capital infusion in the Public Sector Banks, the Banks are well-capitalised. Even though the banks have not only shown improvement on recoveries but have further de-risked their portfolios. The relaxation would aid banks in exiting the PCA framework.

The Parliamentary Committee on Finance had observed that “It is not clear as to how these banks will turn around their operations with the existing curbs on lending and even deposit-taking in the case of some. This could trigger a vicious cycle in the banking sector and the economy at large”. The committee had recommended reviewing the PCA framework.

Month: Categories: Business, Economy & BankingUPSC

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