RBI mulls new economic capital framework, relaxation of PCA norms

In its earlier meeting held on November 19, the board had decided to constitute a committee of experts to look into the economic capital framework.

The board of the Reserve Bank of India (RBI) is holding a meeting to decide on a new economic capital framework (ECF) for the central bank and relaxation in prompt corrective action (PCA) norms for at least some of 12 state-run banks.
 
In its earlier meeting held on November 19, the board had decided to constitute a committee of experts to look into the economic capital framework.
 
Eleven, out of total 21 public sector banks, are under the PCA framework, which imposes lending and other restrictions on weak lenders.
 
These eleven banks are Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Dena Bank and Bank of Maharashtra.
 
On Thursday, seven lenders met Shaktikanta Das to request him to ease the PCA norms.
 
The PCA was one of the key bones of contention between RBI led by Urjit Patel and the Union government. 
 
They also asked for relaxation in the one-day default norm announced in the February 12 RBI circular on reclassification of NPAs.
 
Based on the US Federal Deposit Insurance Corporation PCA framework, the RBI PCA framework was introduced in December 2002 as a structured mechanism. Subsequently, in 2017, the framework was reviewed, based on the recommendations of the working group of the Financial Stability and Development Council on Resolution Regimes for Financial Institutions in India and the Financial Sector Legislative Reforms Commission.
 
Source: Media reports

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