New SIDBI Grade A New Batch Starts on Nov 18

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    Question

    Read the following passage and answer the next 5 question  Central Bank along with a clutch of other lenders was placed under RBI's prompt corrective action (PCA) in 2017 after the regulator found some state-run lenders were in breach of its rules on regulatory capital, bad loans and leverage ratios. Since then all the lenders except Central Bank have improved their financial health and come off RBI's PCA list. A bank under PCA faces greater scrutiny by the regulator and may face lending and deposit restrictions, branch expansion and hiring freezes and other limitations on borrowings. The RBI introduced these norms at a time when Indian lenders were battling record levels of soured assets, prompting the RBI to tighten thresholds. Source: economictimes

    Which of the following are parameters for evaluating whether the bank (Scheduled Commercial Bank) is to be brought under the ambit of Prompt corrective action or not?

    A.    Common Equity Tier 1

    B.    NNPA

    C.   Tier 1 Leverage Ratio

    D.   Net Stable Funding ratio and Liquidity Coverage Ratio

                                                       

    A A and B Correct Answer Incorrect Answer
    B A, B and C Correct Answer Incorrect Answer
    C A, B and D Correct Answer Incorrect Answer
    D A, C and D Correct Answer Incorrect Answer
    E All of the above Correct Answer Incorrect Answer

    Solution

      Capital, Asset Quality and Leverage will be the key areas for monitoring in the revised framework. Indicators to be tracked for Capital, Asset Quality and Leverage would be CRAR/ Common Equity Tier I Ratio, Net NPA Ratio and Tier I Leverage Ratiorespectively.

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