RBI brought NBFCs under PCA Framework

Current Context: The Reserve Bank of India (RBI) has brought Non-Banking Finance Companies (NBFCs) under the ambit of prompt corrective action (PCA) framework.

• The aim behind this step by RBI was to strengthen supervisory tools which are upon NBFCs.
• The PCA framework provisions will be effective from October 2022 on the basis of the financial position of NBFCs on or after 31st March 2022.
• The PCA framework is applied to all deposit-taking NBFCs, excluding government companies, all non-deposit-taking NBFCs in the middle, upper, and top layers.
• RBI will impose PCA when the net non-performing assets are between 6-9% which is risk threshold 1, 9-12% which is risk threshold 2, and more than 12% which is risk threshold 3.