18  Annex Ia: RBI’s Revised PCA Matrix (April 2017) - Indicators and risk thresholds Revised PCA Framework  Capital  (Breach of either CRAR or CET 1 ratio to trigger PCA)  Indicator  Risk Threshold 1  Risk Threshold 2  Risk Threshold 3  CRAR - Minimum regulatory prescription for capital to risk assets ratio + applicable capital conservation buffer(CCB)  upto 250 bps below Indicator  more than 250 bps but not exceeding 400 bps below Indicator  -  <10.875% but >=8.375%  <8.375% but >=6.875%  current minimum RBI prescription of 10.875% (9% minimum total capital plus 1.875%* of CCB as on March 31, 2018) And/ Or Regulatory pre-specified trigger of Common Equity Tier 1 (CET 1min) + applicable capital conservation buffer(CCB) current minimum RBI prescription of 7.375% (5.5% plus 1.875%* of CCB as on March 31, 2018)  upto 162.50 bps below Indicator  more than 162.50 bps below but not exceeding 312.50 bps below Indicator  < 7.375% but >= 5.75%  < 5.75% but >=4.25%  -  In excess of 312.50 bps below Indicator  < 4.25%  Breach of either CRAR or CET 1 ratio to trigger PCA Asset Quality  Net Non-performing advances (NNPA) ratio  >=6.0% but <9.0%  >=9.0% but < 12.0%  >=12.0%  Profitability  Return on assets (ROA)  Negative ROA for two consecutive years  Negative ROA for three consecutive years  Negative ROA for four consecutive years  Leverage  Tier 1 Leverage ratio  <=4.0% but > = 3.5%  < 3.5%  (leverage is over 25 times the Tier 1 capital)  (leverage is over 28.6 times the Tier 1 capital)  19  Annex Ib: Mandatory and discretionary corrective actions under RBI’s Old (2002) and Revised (2017) PCA Frameworks  Specifications  Capital Risk Threshold 1  NPA Risk Threshold 1  Mandatory/Structured Actions Old PCA Revised PCA Framework Framework (Mandatory (Structured Actions) Actions) • Submission and implementation of capital restoration plan by the bank • Bank will restrict expansion of its Restriction on risk-weighted dividend assets distribution/remitt • Bank will not ance of profits to enter into new the parent in the lines of case of foreign business banks • Bank will not access / renew costly deposits Promoters/owners /parent in the case and CDs of foreign banks • Bank will to bring in capital reduce / skip dividend payments  •  • •  •  Bank to undertake special drive to reduce the stock of NPAs and contain generation of fresh NPAs Bank will review its loan policy Bank will take steps to upgrade credit appraisal skills and systems Bank will strengthen  Old PCA Framework  • • •  •  •  • • •  Discretionary Actions Revised PCA Framework  RBI will order recapitalisation Bank will not increase its stake in subsidiaries Bank will reduce its exposure to sensitive sectors like capital market, real estate or investment in non-SLR securities RBI will impose restrictions on the bank on borrowings from inter bank market Bank will revise its credit / investment strategy and controls Bank will not enter into new lines of business Bank will reduce / skip dividend payments Bank will not increase its stake in subsidiaries  Common menu Special Supervisory Interactions • Special Supervisory Monitoring Meetings (SSMMs) at quarterly or other identified frequency • Special inspections/targeted scrutiny of the bank • Special audit of the bank  Strategy related RBI to advise bank’s Board to:  the  • Activate the Recovery Plan that has been duly approved by the supervisor • Undertake a detailed review of business model in terms of sustainability of the business model, profitability of business lines and activities, medium and long term viability, balance sheet projections, etc.
However, as for the U.S. economy, although improvements have been observed in some recent economic indicators, careful examination is still required to judge to what extent business fixed investment and employment will increase following these developments. The pace of economic expansion in East Asia still remains slow compared to what it was a while ago, although there seem to be signs of recovery.