The Reserve Bank of India (RBI) has introduced a PCA framework for large nonbanking financial companies (NBFCs) with effect from October 2022, putting restrictions whenever vital financial metrics dip below the prescribed threshold. What is PCA?

PCA stands for Prompt Corrective Action. It is a supervisory framework under which the RBI places specific operational restrictions on financial institutions (like commercial banks and large NBFCs) whose financial health (such as capital adequacy, asset quality, or leverage) deteriorates past certain threshold levels, aiming to correct their financial health early on.