Relaxation in PCA regulations may not help revive credit growth: Experts

High level of bad loans and dearth of capital lower lending capacity for banks, say experts

With no immediate relaxation for banks that are currently under the Reserve Bank of India’s (RBI’s) prompt corrective action (PCA), stocks of most PCA banks fell 2-5 per cent on Tuesday.

In order to improve credit growth, the government had demanded relaxation in PCA norms, which did not fructify in the RBI’s board meeting on Monday.

PCA banks have some restrictions in terms of lending and branch expansion, among others. Though the matter will be looked into by the board of financial services, the question for investors is whether the relaxation in norms will translate to significant improvement in credit growth or