There are three risk thresholds in the PCA framework for NBFCs.
Thresholds | Parameters | Implications |
Threshold 1
| If the net non-performing assets is between 6-9%. If the capital adequacy ratio falls 300 basis points from the current level of 15-12%.
| NBFCs will be restricted on dividend distribution. Promoters will be asked to infuse capital and reduce leverage. The RBI will also restrict issuance of guarantees or taking other contingent liabilities on behalf of group companies, in case of core investment companies.
|
Threshold 2
| If the net non-performing assets is between 9-12% If the capital adequacy ratio falls 300-600 bps from 12-9%.
| NBFC will be prohibited from opening branches
|
Threshold 3
| If the net non-performing assets is more than 12%. If the capital adequacy ratio falls by 600 bps from 9%.
| All capital expenditure will be stopped, other than for technological upgradation.
|
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