A report has said that RBI's updated `prompt corrective action' (PCA) rules can potentially impact more than half of the NPA-laden state-run banks. Commenting on the issue, a Fitch Official told the media, "More than half of state-owned banks would breach at least one of the new thresholds, mainly owing to high NPLs, based on their latest financial reports."
“The rules, updated last week, suggest "greater willingness" to take regulatory action to address problems at struggling banks, but "implementation is only likely to be effective if it is matched by credible plans to address banks' significant asset quality issues and capital shortages," he added.
According to the rating agency report, PCA was previously viewed as "an extraordinary step" which the central bank avoided but the same is set to change now. Under the previous framework, the RBI's powers were restricted to bank lending but the scope for possible regulatory actions has been broadened under the amended framework.