Table of Contents
- NBFCs To come under the ambit of Prompt Corrective Action
News –
- RBI brings Non-Banking Financial Companies under the ambit of Prompt Corrective Action Framework
Prompt Corrective Action
- It is a framework under which financial institutions with weak financial metrics are put under watch by the RBI
- The scheme was initiated by RBI in 2002, in order to protect the interest of the investor
- Initially it was applicable on banks only but now RBI has brought NBFC also under this ambit.
- Following are the financial metrics or regulatory triggers used by RBI-
Thresholds for invoking PCA
- Capital to Risk weighted asset Ratio
- Non Performing Assets
- Return to Assets
Bad Banks
News –
- Central Government guarantee of Rs.30,600 crore to back Security Receipts issued by National Asset Reconstruction Company Limited (NARCL) for acquiring stressed loan assets
What is NARCL and IDRCL ?
- NARCL is an ARC which will acquire the stressed assets from Whereas the responsibility to dispose and recover the money will be of IDRCL.
- Deposit Insurance and Credit Guarantee Corporation Act, 1961
News –
- DICGC Bill 2021 has been approved by the Union Cabinet making an amendment to The DICGC Act of 1961
Key Features of DICGC (Amendment) Act, 2021
- Interim payments from the DICGC will be made to certain depositors for 90 days
- For banks to make timely payments to the DICGC, provisions for penal interest are in place.
- Prior RBI permission is required to remove the previous premium ceiling of 15% and revise.
News
- Recently, Parliament passed the Insolvency and Bankruptcy Code (Amendment Bill) in 2021 in the Lok
About the Amendment
- It introduced an alternate insolvency resolution process for Micro, Small, and Medium Enterprises (MSMEs) with defaults up to Rs 1 crore called the Pre-packaged Insolvency Resolution Process (PIRP).
- PPIR is a form of restructuring that allows creditors and debtors to work on an informal plan and then submit it for Under this system, financial creditors will agree to a potential investor’s terms.
- The PIRP also allows for a Swiss challenge to the resolution plan. A Swiss Challenge is a method of bidding, often used in public projects, in which an interested party initiates a proposal for a contract or the bid for a project.
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