Question
Consider the following statements regarding the ‘Supervisory Action Framework’:
Select the correct answer using the code given below:
- It is applicable for UrbanCooperative banks
- It can be initiated in case of serious governance issues
Select the correct answer using the code given below:
Answer: Option B
Answer: (b)
Since a lot of urban-cooperative banks (UCBs) were also facing issues, RBI has brought in the “Supervisory Action Framework” (SAF) for UCBs in place of PCA for commercial banks. The three parameters (NPA level, Return on Assets
i.e. profit and Capital Adequacy Ratio), based on which PCA is invoked, SAF is also invoked based on three similar parameters (NPA level, two consecutive years loss and capital adequacy ratio), but the level may be different at which SAF is triggered.
SAF in UCB can also be initiated in case of serious governance issues. Once a UCB has been put under SAF, various restrictions on dividends, donations, new loans, capital expenditure etc. can be imposed, which are again similar to PCA restrictions.
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Answer: (b)
Since a lot of urban-cooperative banks (UCBs) were also facing issues, RBI has brought in the “Supervisory Action Framework” (SAF) for UCBs in place of PCA for commercial banks. The three parameters (NPA level, Return on Assets
i.e. profit and Capital Adequacy Ratio), based on which PCA is invoked, SAF is also invoked based on three similar parameters (NPA level, two consecutive years loss and capital adequacy ratio), but the level may be different at which SAF is triggered.
SAF in UCB can also be initiated in case of serious governance issues. Once a UCB has been put under SAF, various restrictions on dividends, donations, new loans, capital expenditure etc. can be imposed, which are again similar to PCA restrictions.
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