Reserve Bank of India: Reserve Bank of India has issued new rules regarding Prompt Corrective Action (PCA) framework. RBI has said that strict monitoring norms under the new rules will be applicable to government-owned non-banking financial companies (NBFCs) from October 2024.
When a financial entity is placed under the PCA format, there are restrictions on its dividend distribution/remittance of profits, investment or sale of equity to promoters/shareholders and giving guarantees or taking on other contingent liabilities on behalf of group companies.
The framework was released in 2021
The Reserve Bank had released the PCA format for NBFC units on December 14, 2021. Earlier only private sector NBFC companies were kept under its purview, but now it has been decided to bring public sector NBFCs also under it.
RBI gave information
RBI has said in a circular that the format has been reviewed and it has been decided to extend it to government NBFCs (except small companies) from October 1, 2024. For this, the audited financial data till or after March 31, 2024 will be used as the basis.
These are included in NBFC companies
Some major government NBFC companies include PFC, REC, IRAFC and IFCI.
Why are new rules being implemented?
The purpose of implementing the PCA format is to ensure timely monitoring of any financial entity. This requires institutions to initiate and implement timely remedial measures to improve their financial health
