Why Me? The Saga of Public Sector Banks under Prompt Corrective Action

Abstract

This study explores Income and funding strategies of banks under Prompt Corrective action (PCA) and it also compares the Technical, Pure technical and scale efficiency of these banks with Public sector banks not under PCA and Private sector banks. This study found that PCA banks earn higher non-interest income and have higher borrowings than Non-PCA Public sector banks and are as efficient or inefficient as Non PCA-public sector banks. However, PCA banks are bigger in size and have lower Technical but higher Pure Technical and scale efficiencies than Private sector banks. This study highlights the concern of Dr. Viral V Acharya, regarding the unfinished agenda of restoring Public Sector banks’ health in India (R.K. Talwar Memorial Lecture) and not just the banks under PCA.