Cooperative banks will soon be able to do compromise settlements, write-offs on NPAs: RBI

Reserve Bank Governor Shaktikanta Das on Thursday said 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 the regulated entities including cooperative lenders will now be able to execute "compromise settlements and technical write-offs" to resolve non-performing assets, Das said. Till now, this avenue for dud asset resolutions was available only with scheduled commercial banks and select non-bank finance companies, Das said, adding that comprehensive guidelines on the same will be released soon. It can be noted that the cooperative lending sector frequently makes headlines for lack of governance practices and conflicts of interest.

Das also said that it is proposed to rationalise the extant 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 UCB (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 which have met the targets as on March 31, 2023, shall be suitably incentivized, he added.

To further facilitate 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.

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RBI has decided to rationalise and simplify the licensing framework for authorized persons under Foreign Exchange Management Act (FEMA), 1999, to improve the 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, RBI has proposed to streamline the process 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.