The Reserve Bank of India has launched a “prompt corrective action” framework for non-bank financial companies (NBFCs), aiming to intervene early to fix weakness in the sector.

The framework specifies three “risk thresholds” based on a firm’s capital position and its ratio of non-performing assets to total assets.

For each threshold that a firm crosses, managers will have to take certain mandatory actions, such as restrictions on dividends, and may also implement “discretionary” actions. The