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General Studies (Paper 1) from JKPSC JKAS 2022 Prelims
Subject: General Studies (Paper 1) Economy Jammu & Kashmir Public Service Commission Last updated May 9, 2026
JKPSC Prelims 2022 General Studies (Paper 1)

Consider the following statements regarding Prompt Corrective Action (PCA) of Reserve Bank of India:

1. It aims to monitor the operation of weaker banks more closely to encourage them to conserve capital and avoid risks.
2. It imposes certain restrictions on dividend distribution and expansion of branches by banks that are financially weak.

Which of the above statements is/are incorrect?

Answer & Explanation

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Correct Answer: Option D — Neither 1 nor 2
This question requires careful reading, as it asks for the incorrect statements. Here is the breakdown of why both statements are actually correct, making "Neither" the right choice:

Statement 1 is correct: The Prompt Corrective Action framework is designed by the Reserve Bank of India to identify and closely monitor banks with weak financial metrics, specifically concerning capital adequacy, asset quality, and profitability. The primary objective is to intervene early and encourage these banks to conserve capital and avoid taking on further financial risks.

Statement 2 is correct: When a bank falls under the Prompt Corrective Action framework, the Reserve Bank of India triggers mandatory corrective actions to halt further financial deterioration. These restrictions explicitly include halting dividend distributions and stopping the expansion of new branches. Depending on the severity, it may also cap management compensation and restrict certain types of lending.
Answer verified by Quintessence Classes faculty — Karan Nagar, Srinagar.
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JKPSC JKAS 2022 Prelims

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Exam JKPSC
Recruitment JKAS
Stage Prelims
Year 2022
Subject General Studies (Paper 1)
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