Sign In
Learn bits
Economy
Mahesh

25/10/22 22:51 PM IST

RBI increases oversight on Dhanlaxmi Bank

In News 
  • Delay in capital raising has placed Dhanlaxmi Bank under the central bank’s tight monitoring. 
Criteria for placing under Monitoring 
  • Under the Banking regulations act 1949, RBI has the duty to inspect and regulate all commercial banks including Basel norms, CRR, SLR etc.
  • The capital-to-risk weighted assets ratio or capital adequacy ratio measures a bank’s financial stability by measuring its available capital as a percentage of its risk-weighted credit exposure.
  • Under the Basel norms, a bank must keep a minimum Capital to Risk Weighted Asset Ratio(CRAR) of 9% or higher.
  • As NPA increases→ asset quality decreases→RWA increase→ And so Bank would need to increase their CRAR to maintain the confidence of the market.
  • In Dhanalakshmi bank, NPA increased but CRAR decreased. Hence RBI took it under direct observation.
Basel Norms
  • These norms were set by the member countries of the Bank of International Settlements to ensure global financial stability.
  • Liquidity coverage ratio should be more than or equal to one.
  • It means a bank has enough high-quality liquid assets(cash, gold etc) to survive a high-stress scenario of cash outflow(the bank run) for at least 30 days or more.
Prompt Corrective Action framework
  • Under PCA, all commercial banks are monitored for asset quality and capital sufficiency.
  • Accordingly, they are classified into three risk categories(the higher the number higher the risk).
  • All commercial banks and Non-deposit taking NBFCs are covered under the PCA norms of RBI. NABARD sets PCA norms for Regional Rural banks.
  • Exit from PCA norms is possible only if no breach is detected in 4 consecutive quarterly audit statements.
Source- The Hindu 

More Related Current Affairs View All

05 May

Key objectives of caste count

'The Union Cabinet has decided that the next Census will include questions on caste to its enumeration of India’s population, for the first time in almost a century. ' T

Read More

05 May

2 new genome-edited rice varieties

'Agriculture Minister Shivraj Singh Chouhan recently released two genome-edited varieties of rice, the first achievement of its kind in the country.' These two varieties, which

Read More

05 Mar

First-ever comprehensive survey of India’s river dolphins

'Prime Minister Narendra Modi released the results of the first-ever comprehensive population estimation of riverine dolphins – Gangetic and Indus dolphins – done in In

Read More

India’s First Ai-Driven Magazine Generator

Generate Your Custom Current Affairs Magazine using our AI in just 3 steps