(b) "Reserve Bank of India will initiate certain Structured Actions in respect of the Banks which have hit the 'Trigger Points' in terms of Capital to Risk Assets Ratio (CRAR), Net NPA and Return on Assets (ROA) etc." Th

The Prompt Corrective Action (PCA) Norm is a supervisory tool and is imposed when a bank breaches certain regulatory thresholds on Capital to Risk Weighted Assets Ratio (CRAR), Net NPAs and Return on Assets (ROA) etc. Prompt Corrective Action (PCA) is a framework under which Financial Institutions with Weak Financial Metrics are put under watch by the Reserve bank of India (RBI). Earlier, the RBI had imposed PCA only on Banks. Now, PCA framework is extended to NBFCs also. RBI's common menu for selection of 'Discretionary Corrective Actions' in respect of the following areas are: (i) Governance related Actions: RBI to actively engage with the bank's Board on various aspects as considered appropriate. RBI to recommend to Owners (Government/ Promoters/ Parent of Foreign Bank Branch) to bring in New Management / Board. RBI to remove managerial persons under Section 36AA of the Banking Regulation Act, 1949 as applicable. RBI to supersede the Board under Section 36ACA of the Banking Regulation Act, 1949 / recommend supersession of the Board as applicable. RBI to require bank to invoke claw back and malus clauses and other actions as available in regulatory guidelines, and impose other restrictions or conditions permissible under the Banking Regulation Act, 1949. Impose restrictions on directors' or management compensation, as applicable. Strengthening the audit committee functions to ensure better internal controls and risk management. (ii) Capital related Actions: Detailed Board level review of capital planning. Submission of plans and proposals for raising additional capital. Requiring the bank to bolster reserves through retained profits. Restriction on investment in subsidiaries/ associates. Restriction in expansion of high risk-weighted assets to conserve capital. Reduction in exposure to high-risk sectors to conserve capital. Restrictions on increasing stake in subsidiaries and other group companies. Adjusting the risk weights on certain assets to ensure better capital adequacy ratios. (iii) Credit Risk related Actions: Preparation of time bound plan and commitment for reduction of stock of NPAs. Preparation of and commitment to plan for containing generation of fresh NPAs. Higher provisions for NPAs/NPIs and as part of the coverage regime. Strengthening of loan review mechanism. Restrictions/reduction in total credit risk weight density (example: restriction/reduction in credit for borrowers below certain rating grades, restriction/reduction in unsecured exposures, etc.). Reduction in loan concentrations; in identified sectors, industries or borrowers. Sale of assets. Action plan for recovery of assets through identification of areas (geography wise, industry segment-wise, borrower-wise, etc.) and setting up of dedicated Recovery Task Forces, Adalats etc. Prohibition on expansion of credit/ investment portfolios other than investment in government securities / other High-Quality Liquid Investments. Intensifying efforts on the recovery of non-performing assets (NPAs) through legal and strategic measures.