“The loss-absorption capacity of PCA banks is on the mend, but there is some distance to go in their catch-up to healthy levels,” Acharya said in a speech at his alma mater, the IIT Bombay, in Mumbai.
“Without the PCA imposition, some banks would have incurred even higher losses and required even more of taxpayer money for recapitalisation. Imposition of PCA can thus be seen as first stabilising the banks at risk, and then undertaking the deeper bank reforms needed for longterm viability.”
The RBI has put 12 banks, 11 state-run and one from the private sector, under PCA because of their poor financial health. When a bank is under PCA, its lending activities are restricted and the focus is on recovery and reducing expenses. This helps them conserve capital and regain their strength. Allahabad Bank, UCO Bank and Dena Bank are among the ones in PCA.