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RBI discussed PCA norms with finance ministry before rollout, say sources

Updated : December 14, 2018 06:49:17 IST

The Reserve Bank of India (RBI) had discussed prompt corrective action (PCA) norms with the finance ministry before the rollout, said sources familiar with the matter.

At least three letters were exchanged with the government and the RBI before the rollout of the revised framework for PCA norms in April of 2017, sources privy to the matter told CNBC-TV18.

Earlier, the government said it was not consulted by RBI and that the decision to bring PCA norms was taken unilaterally by the central bank.

Earlier, the government had said that it was not consulted by RBI before finalising norms for PCA and classification of non-performing assets (NPAs).

On September 2016, RBI wrote the first letter to the finance ministry mentioning the proposal and norms that it was going to bring and the changes in the existing PCA norms.

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In a response to that letter, the finance ministry clearly indicated that it was broadly in agreement with the PCA norms by the RBI but the ministry had asked for some clarifications.

The Reserve Bank had sent another letter to the finance ministry in April 2017, where it clarified the points that were sought by the government and it also said that it would be going ahead with the PCA norms as discussed with the government.

Recently, the government had asked RBI for a relaxation in PCA norms for banks, so they can lend more. The PCA action was initiated against 11 public sector banks.
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