Despite pressure from the government to take a softer stance towards PSU banks under the prompt corrective action (PCA) framework, the Board for Financial Supervision (BFS) of the Reserve Bank of India (RBI) did not discuss easing lending curbs facing 11 state-run banks.
BFS, headed by RBI Governor Urjit Patel, only discussed the banks’ September quarter results and did not address the prompt corrective action plan. The Central Board meeting on November 19 had asked BFS to look into the issue of relaxing the curbs on PSU banks under PCA. “BFS is waiting for a detailed report from RBI officials. It will consider and submit it to the Central Board later,” said a source.
Government nominees on the RBI Central Board had put pressure on the RBI to remove curbs on PSU banks put under PCA. However, the RBI refused to relax the rules.
Acceding to the demand of several stressed PSU banks, the finance ministry has made a case for easing the “stringent” PCA framework to enable PSBs to lend more freely at a time when NBFCs are facing a liquidity crunch. The PCA framework is aimed at nursing sick banks back to health through certain tough conditions set for them. It was hoping that the RBI will relax PCA norms for 3 or 4 banks at the earliest.
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