RBI introduces prompt corrective action framework for NBFCs

Mumbai: The Reserve Bank of India (RBI) on Tuesday issued the Prompt Corrective Action (PCA) framework for Non-Banking Financial Companies (NBFCs).

“The PCA Framework for NBFCs shall come into effect from October 1, 2022, based on the financial position of NBFCs on or after March 31, 2022,” the RBI said in a statement. “A separate circular would be issued in due course with regard to the applicability of PCA Framework to Government NBFCs,” it added.

It may be recalled that the revised Prompt Corrective Action (PCA) framework for Scheduled Commercial Banks (SCBs) was issued on November 2, 2021.

NBFCs have been growing in size and have substantial inter-connectedness with other segments of the financial system. Accordingly, a PCA Framework for NBFCs has also been put in place to further strengthen the supervisory tools applicable to NBFCs, the central bank said.

The new framework will be applicable to all deposit-taking NBFCs, excluding Government companies; and all non-deposit taking NBFCs in middle, upper and top layers.