New guidelines for the PCA framework have been released by the Reserve Bank of India. According to the RBI, government-owned NBFCs will be subject to severe monitoring requirements under the new regulations starting in October 2024.
There are limitations on a financial entity’s dividend distribution/remittance of profits, investment in or sale of stock to promoters/shareholders, and provision of guarantees or assumption of other contingent obligations on behalf of group firms when it is placed under the PCA structure.
In 2021, the framework was made public
On December 14, 2021, the Reserve Bank made the PCA format for NBFC units available. Only private-sector NBFC businesses were formerly included in its jurisdiction; however, it has now been decided to include public-sector NBFCs as well.
RBI provided the details
The format has been examined, according to the RBI, and it will be made available to government NBFCs (apart from small businesses) as of October 1, 2024. The basis for this will be the audited financial data up until or including March 31, 2024.
These are included in NBFC firms
PFC, REC, IRAFC, and IFCI are a few notable government NBFC businesses.
Why are RBI new regulations being put in place?
The PCA framework is being used to ensure timely monitoring of all financial entities. Because of this, institutions must start and carry out prompt corrective actions to enhance their financial stability.
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