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Supervisory Action Framework (SAF) for RRBs - Prompt Corrective Action (PCA) - Revision in Trigger Points
EC No. 233 /DoS -23 /2019                                                                 25 July 2019
Ref. No. NB. DoS. Pol. HO/    1748   /J-1/2019-20
 
The Chairman 
 
All Regional Rural Banks
 
Dear Sir
 
Supervisory Action Framework (SAF) for RRBs-Prompt Corrective Action (PCA)- Revision in Trigger Points 
 
Please refer to our Circular Letter No. NB. DoS. HO. Pol /4801/J-1/2017-18 (Circular No. 45/DoS-12/2018) dated 16 March 2018 on the above subject.
 
2.  We have since reviewed the Trigger Points under ‘NPAs’ and ‘Profitability’ parameters indicated in our aforesaid circular. Accordingly, the Trigger Points and the Self Corrective Action required to be taken by RRBs as contained in paragraphs 4 & 5 of the Annexure to the aforesaid circular dated 16 March 2018 have been revised. 
 
3.  Trigger Points: The revised trigger points applicable to RRBs would now be as under:
-
Risk Threshold CRAR Net NPAs Profitability
I Less than 9% but equal or more than 6% Net NPAs over 10% but less than 15% Negative Return on Assets (ROA) for two consecutive years
II Less than 6% but equal or more than 3% Net NPAs of 15% & above 
Negative Return on Assets (ROA) for three consecutive years
III CRAR less than 3% 
----- Negative Return on Assets (ROA) for four consecutive years
 
4.  Self-Corrective Action by RRBs
 
The details of the parameters, the Trigger Points and the Corrective Action to be taken by the RRBs is furnished in Annexure I.
 
5.  The revisions in the PCA Framework may be placed before the Board in its ensuing Meeting.
 
6.  Please acknowledge the receipt of this circular to our Regional Office concerned.
 
Yours faithfully 
       Sd/-
 (K. R. Rao)
Chief General Manager
 
Annexure I
 
Prompt Corrective Action-Supervisory Action Framework
 
Sl No. Parameter Trigger Points (TP) Corrective Action by RRBs
I CRAR (i)  CRAR less than 9% but equal or more than 6% a. Submission of Board approved implementable action plan for capital restoration to NABARD RO;
b. Restriction on expansion of risk-weighted assets;
c. Review of the Action Plan on monthly/quarterly basis and submission of feedback to NABARD RO regularly;
Discretionary Action
a. Bank will not enter into new lines of business.
 
(ii)  CRAR less than 6% but equal or more than 3% a. In addition to the self-corrective actions at TP I (i) above, 
b. Discussion by the bank's Board on corrective action plan with NABARD RO;
c. Discussion in and guidance of Empowered Committee for improvement in the working;
d. Bank to revise its credit/investment strategy and controls;
(iii)  CRAR less than 3% a. In addition to the self-corrective actions at TP I (ii) above, 
b. Sponsor bank may closely monitor the functioning of the bank
 
II NPAs (i) Net NPAs over 10% but less than 15% a. Preparation of an implementable action plan with the approval of the Board for reduction of net NPAs to less than 3%; 
b. Revisiting the loan and recovery policies;
c. Identification of sector and area / branches which have high percentage of NPAs / Overdue; 
d. Strengthening of follow-up mechanism of advances including loan review mechanism for large loans;
e. Up-gradation of credit appraisal skills and systems;
f. Effective follow-up of suit filed/decreed cases;
g. Bank will put in place credit risk management policies/process/ procedures / prudential limit;
h. Review of the action plan on monthly / quarterly basis and submission of feedback to NABARD RO regularly;
 
Discretionary Action
 
a. Bank will not enter into new lines of business
(ii) Net NPAs of 15% and above a. In addition to the self-corrective actions at TP II (i) above, 
b. Discussion by the bank's Board on corrective action plan with NABARD RO;
c. Discussion with sponsor bank to support the bank's efforts in recovery;
d. Discussion in and guidance of Empowered Committee of RBI for improvement in functioning.
 
III Profitability (i)Negative Return on Assets (RoA) for two consecutive years a. Not to access / renew costly deposits;
 
b. Increase fee based income;
c. Contain administrative expenses;
 
Discretionary Action
 
a. Bank will not enter into new lines of business
(ii)Negative Return on Assets (RoA) for three consecutive years a. In addition to the self-corrective actions at TP III (i) above,
b. Reduction of NPAs and contain generation of fresh NPAs.
(iii)Negative Return on Assets (RoA) for four consecutive years a. In addition to the self-corrective actions at TP III (ii) above,
b. Restrictions on Capital expenditure other than for technological upgradation within Board approved limits.