RBI likely to soften PCA guidelines for Allahabad, Dena, and 9 other public sector banks
RBI, in its recent nine-hour long board meeting agreed to revamp its structuring scheme for small and medium sized enterprizes (SMEs) to get a loan up to Rs. 25 Cr. The decision was taken in line with the advice of the board.
Besides, the board will now review the Prompt Corrective Action or PCA framework that imposes restrictions on lending towards banks which have been hit by bad loans and weak capital.
According to sources, the changes in PCA could be done within next few weeks. Almost 11-12 banks are possibly under RBI's current focus. Of these, two banks, Dena Bank and Allahabad Bank, are facing restrictions on expansion of the business. Last month, state-run banks had requested the government for relaxation in PCA guidelines as these were indirectly impacting their lending ability.
However, RBI Deputy Governor Viral V Acharya earlier this month said the imposition of the PCA was essential for the revival of financially weak banks and deepening reforms in the banking space. The PCA framework is an essential element for safeguarding overall financial stability, he had said.
The Board for Financial Supervision (BFS) is expected to release some of the banks from PCA framework in the wake of improvement in their operations.