Cooperative Banks Empowered for NPA Compromise Settlements, Write-offs

Reserve Bank Governor Shaktikanta Das said on Thursday that cooperative lenders will soon be able to do technical write-offs and execute compromise settlements with defaulting borrowers.
RBI has decided to widen the scope of the framework for resolution of stressed assets, under which all regulated entities, including cooperative lenders, will now be able to execute “compromise settlements and technical write-offs” to resolve non-performing assets, Das said. It can be noted that the cooperative lending sector frequently makes headlines for its lack of governance practises and conflicts of interest. Das also said that it is proposed to rationalise the existing prudential norms on the restructuring of borrower accounts affected by natural calamities. The Governor also acknowledged that a need has arisen to ease the implementation challenges faced by other UCBs (urban cooperative banks) on the priority sector lending targets and announced to extend the timelines for achieving the targets by two more years up to March 2026.
Lenders that have met the targets as of 31 March, 2023, shall be suitably incentivized, he added. To further facilitate the orderly development of the digital lending ecosystem and enhance credit penetration in the economy, the RBI has decided to introduce default loss guarantee arrangements in digital lending. “With a view to further promoting responsible innovation and prudent risk management, it has been decided to issue guidelines on default loss guarantee arrangements in digital lending,” Das said.
RBI has decided to rationalise and simplify the licencing framework for authorised persons under the Foreign Exchange Management Act (FEMA), 1999, to improve efficiency in the delivery of foreign exchange facilities to various segments of users, including common persons, tourists, and businesses, Das said.
To further enhance the efficiency of the Bharat Bill Payment System and to encourage greater participation, the RBI has proposed to streamline the flow of transactions and membership criteria for operating units, Das said. With a view to providing greater flexibility for managing liquidity, it has been decided that scheduled commercial banks, excluding small finance banks, can set their own limits for borrowing in call and notice money markets within the prescribed prudential limits for inter-bank liabilities, Das said.