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RBI comes out with PCA framework for NBFCs

The RBI has issued a Prompt Corrective Action (PCA) framework for NBFCs to strengthen its supervisory mechanism over these financial institutions.

The RBI said,” NBFCs have been growing in size and have substantial inter-connectedness with other segments of the financial system. Accordingly, a PCA Framework for NBFCs has also been put in place to further strengthen the supervisory tools applicable to NBFCs.”

The framework will be applicable on all deposit taking NBFCs except government ones. According to the RBI statement all non-deposit taking NBFCs in middle, upper and top layers [Excluding – (i) NBFCs not accepting/not intending to accept public funds; (ii) Government Companies, (iii) Primary Dealers and (iv) Housing Finance Companies] will come under the PCA framework.

This will be applicable from October 1, 2022 and will be applied based on the financial health of the NBFCs on or after March 31, 2022.

A separate announcement will be made for government NBFCs, the RBI said.

A revised PCA framework was issued on November 2 for scheduled commercial banks.

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