Coop banks will soon do NPA write-offs: RBI Guv

Mumbai 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 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.