Current Affairs · Banking Regulations
A Non-Banking Financial Company-Middle Layer (NBFC-ML) is evaluating its compliance under the Prompt Corrective Action (PCA) framework for NBFCs as of June 2025. The entity has a CRAR of 11.5%, a Tier 1 Capital Ratio of 8.2%, and a Net Non-Performing Asset (NNPA) ratio of 6.5%. Based on the PCA triggers, which status applies?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The NBFC is in Risk Threshold 3 because its CRAR is less than 12% for three consecutive years, which will lead to a mandatory merger.
- 2The NBFC is not under PCA because the triggers only apply to the Upper Layer and the Top Layer.
- 3The NBFC is in Risk Threshold 2 because its Tier 1 capital is below 9% and its NNPA is above 6%, resulting in restrictions on branch expansion.
- 4The NBFC is in Risk Threshold 1 because its CRAR is below 12% and its NNPA is above 6%, leading to mandatory restrictions on dividend distribution and the requirement for a capital restoration plan.✓
Correct answer
The NBFC is in Risk Threshold 1 because its CRAR is below 12% and its NNPA is above 6%, leading to mandatory restrictions on dividend distribution and the requirement for a capital restoration plan.
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