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PRELIMS FACTS 12-05-2018

FACT # 1


Why in news? RBI has put DENA Bank under PCA Framework.

Prompt Corrective Action (PCA) Framework:

  • RBI has issued a policy action guideline in the form of Prompt Corrective Action (PCA) Framework if a commercial bank’s financial condition worsens below a mark.
  • The PCA framework specifies the trigger points or the level in which the RBI will intervene with corrective action.
  • These trigger points are expressed in terms of parameters for the banks.
  • The parameters that invite corrective action from the central bank are:
    • Capital to Risk weighted Asset Ratio (CRAR):
      • CRAR less than 9%, but equal or more than 6%
      • CRAR less than 6%, but equal or more than 3%
      • CRAR less than 3%
    • Net Non-Performing Assets (NPA):
      • Net NPAs over 10% but less than 15%
      • Net NPAs 15% and above
    • Return on Assets (RoA):
      • ROA below 0.25%
    • Leverage ratio
  • When these parameters reach the set trigger points for a bank (like CRAR of 9%, 6%, 3%), the RBI will initiate certain structured and discretionary actions for the bank.
  • Some of the structured and discretionary actions that could be taken by the Reserve Bank are:
    • Recapitalization
    • Restrictions on borrowing from inter-bank market to steps to merge/amalgamate/liquidate the bank or impose moratorium on the bank if its CRAR does not improve beyond etc.).
  • The corrective actions are tough with worsening of the financials.
  • The PCA framework is applicable only to commercial banks and not extended to co-operative banks, non-banking financial companies (NBFCs) and FMIs.


PCA on Dena Bank:

  • Earlier the RBI in April 2017 had issued a new set of enabling provisions under the revised PCA framework with a clause that if the bank does not show improvement then it could be either be merged or taken over by other bank.
  • Now, in 2018, the Reserve Bank has initiated prompt corrective action against public sector lender Dena Bank NSE -0.81 %.
  • This has been done in view of high non-performing loans, restricting the bank from giving fresh credit and new hiring.
  • This means Dena bank can disburse loans for credit facilities already sanctioned, but cannot sanction fresh loans.
  • In addition, RBI also has barred from recruiting more staff.
  • RBI may lift these restrictions in case the bank improves profitability and reduces the ratio of bad loans.

FACT # 2


Why in news? Sikkim has got its first airport– Pakyong Airport which is considered as an engineering marvel.

Pakyong airport:

  • Pakyong Airport is a Greenfield airport near Gangtok, the state capital of Sikkim, India.
  • The airport, spread over 400 ha (990 acres), is located at Pakyong village about 35km (21.75 mi) south of Gangtok.
  • It is the first Greenfield airport to be constructed in the Northeastern Region of India.
  • As on date, Sikkim was the only state in India to not have an airport.
  • The new Pakyong Airport in Sikkim is an engineering marvel as it is built at a height of 4,500 feet on inhospitable terrain.
  • This is the first ever airport to be built in the state.
  • Sikkim is yet to get connected by Indian Railways.
  • The Pakyong Airport is about 60 kms away from the Indo China border.
  • It has received aerodrome license from Directorate General of Civil Aviation for commercial operations.
  • It is now the 100th operational airport in the country and is built as a part of the regional connectivity scheme UDAN (Ude Desh ka Aam Naagrik).
  • As a part of this scheme, 25 airports have been added in the past few years.
  • The Indian Air Force has already landed its Dornier 228 aircraft at the new Pakyong airport and will be able to land other types of aircraft as well.
  • The new airport will also prove to be a boon to tourists to Sikkim.

FACT # 3


Why in news? Indian Navy Ship Sumedha has been deployed in Maldives to carry out surveillance of the exclusive economic zone as a joint mission.

INS Sumedha:

  • INS Sumedha(P58) is the third Saryu class patrol vessel of the Indian Navy.
  • It is designed and constructed indigenously by the Goa Shipyard Limited.
  • It is designed to undertake:
    • fleet support operations
    • coastal and offshore patrolling
    • ocean surveillance
    • monitoring of sea lines of communications
    • offshore assets and escort duties
  • The vessel will undertake joint EEZ surveillance of Maldives as part of Indian navy’s ‘Mission based deployments’.
  • The ship would undertake an operational turnaround (OTR) and Male where ship would interact and impart training to Maldives’ National Defence Forces (MNDF) personnel.
  • INS Sumedha would also embark MNDF personnel onboard and undertake joint EEZ surveillance of Maldives.
  • The MNDF personnel would disembark at Male, on completion of the EEZ surveillance.

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