PROMPT CORRECTIVE ACTION (PCA) FRAMEWORK FOR NBFCs

About:

• This will take effect October 1, 2022.
  
  
• This is in line with the PCA framework for banks, whose aim was to help improve their financial condition and governance issues.
  
  
• The framework will apply to all deposit-taking NBFCs, all non-deposit taking NBFCs in the middle, upper and top layers, including investment and credit firms, core investment firms, infrastructure debt funds, infrastructure finance firms and microfinance institutions.
  
  
• It has excluded NBFCs not accepting or not intending to accept public funds, primary dealers and housing finance firms, along with government-owned ones.
  
  
• The objective of the framework is to enable supervisory intervention at the appropriate time and require the supervised entity to initiate and implement remedial measures in a timely manner, so as to restore its financial health.
  
  
• Among large NBFCs (assets exceeding ₹25,000 crore), rating agency ICRA noted that three entities were in breach of the net NPA criterion as of September. However, all the entities have established parentage.