Banking News

RBI raises concern over high bad loan ratio in urban cooperative banks


Kolkata: The Reserve Bank of India has raised concerns over the high bad loan ratio in urban cooperative banks and laid down an eight point charter including governance standard for their improvement.

The governor said that even as UCBs have their cumulative non-performing assets ratio improved to 8.7%, this is “not a comfortable number”. The banking sector gross NPA has eased to a decadal low of 3.9% at the end of March.

Granularly, some of the UCBs have very high NPA which according to Das “not at all satisfactory”.

In an interaction with directors of some of the Mumbai-based UCBs on Monday in the financial capital, Das urged them to work on improving asset quality and bettering underwriting standards.

He told them focus on bad loan recovery especially from the top 20 defaulters in the sector which account for 60% of the total overdue. “The list includes people who are doing well in their business,’ Das said, suggesting that loan recovery from these accounts would improve the sector asset quality profile.

A healthy recovery trend assumes importance since, as the governor said, “protecting depositors money is a sacred duty” of every bank.On governance, the governor stressed on democratisation of board discussions. “The board should not be dominated by one or two members,” he said.Overall, RBI believes that UCBs need to focus on their governance standard, the functioning of boards, credit risk management, transparency in accounting, liquidity management, quality and optimisation of manpower, IT system and navigating change.

While some of banks have done well in these parameters but the central bank wants improvement in the sectoral level. “The financial sector stability depends on every banking institutions,” Das said.


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