Prompt Corrective Action (PCA) framework is a tool by the Reserve Bank of India to for taking direct action on weak and troubled banks, so as to avoid banking failures which is negative for the health of the economy.

RBI brings banks under the PCA framework whenever they breaches the stipulated risk thresholds in the identified areas of monitoring, which includes capital, asset quality (net Non-Performing Assets ratio) and profitability, to ensure that corrective measures are taken in proper time and the banks are saved from going bust.

The main aim of the framework is to strengthen the financial health of the banking system by encouraging banks to abstain from riskier activities, improve operational efficiency and to focus on conserving capital. It gives RBI an opportunity to engage closely with the banks’ management to secure their financial health.