RBI, govt. to bury the hatchet?

Both working for agreeable solution

November 15, 2018 01:02 am | Updated 01:02 am IST - New Delhi

The government and the Reserve Bank of India seem to be veering around to reach an agreeable solution, particularly with respect to relaxation of the Prompt Corrective Action (PCA) framework and easing of lending norms for the MSME sector, ahead of the RBI board meeting on November 19, sources said.

If not in this board meeting, the sources say, the issue of relaxation of PCA framework, which the Finance Ministry has been pitching for, will be reached in the next few weeks. As a result of relaxation, some banks may come out of the PCA framework by the end of the current fiscal.

Of the 21 state-owned banks, 11 are under the PCA framework. These are Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Dena Bank and Bank of Maharashtra.

Crucial indices

The PCA framework kicks in when banks breach any of the three key regulatory trigger points — capital to risk weighted assets ratio, net non-performing assets (NPA) and return on assets (RoA). The RBI is also likely to agree to easing of lending norms for the MSME sector, including strict rating criteria, to improve credit flow, the sources said. The RBI is expected to consider a special dispensation for the MSME sector and NBFCs.

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