Banks ask new RBI governor Shaktikanta Das for relaxation in PCA norms

Seven public sector banks in their meeting with the newly-appointed governor of the Reserve Bank of India (RBI), Shaktikanta Das asked for relaxation in prompt corrective action (PCA) norms, a report in Mint claimed. 

Quoting two officials, the report further stated that the meeting lasted for approximately 90 minutes in which Shaktikanta Das tried to understand the problems faced by state-owned banks.

He further told the publication that apart from the governor, all four deputy governors were present as well, and the meeting was attended by heads of IDBI Bank, Punjab National Bank (PNB), State Bank of India (SBI), Union Bank of India, Central Bank of India, Dena Bank, and Bank of India.

"We sought easing of PCA norms as 11 of the 21 lenders are under this restricted-lending framework," the newspaper quoted another banker as saying.  

Earlier, a Parliamentary Committee had expressed apprehension over the PCA framework and asked the RBI to "relax or review" PCA in case of banks where even retail banking is prohibited. 

As many as 11, including Dena Bank and Allahabad Bank, of the 21 public sector banks (PSBs) are under the RBI's PCA framework. The government feels the need to revisit the PCA guidelines as the restrictions on the banks is stifling their growth with their lending ability getting impacted. Bankers feel that unless the income increases, it is difficult for the banks to come out of the PCA.

PCA framework, aimed at improving their financial health, sets stringent conditions including restrictions on lending for the banks.

The RBI, however, was not in favour of any relaxation with its deputy governor Viral Acharya recently defending the PCA framework saying that the banks would have incurred even higher losses and required even more of taxpayer money for recapitalisation.