RBI eases NPA norms for co-ops

The Reserve Bank of India has permitted urban co-operative banks to implement the 90-day impairment norm from the financial year-end March 2007, thereby postponing the earlier deadline from March 2005.

The RBI, in a statement issued on Saturday, said taking into consideration representation from UCBs, it has decided that the 90-day impairment norm for gold loans and small loans up to Rs 100,000 could be implemented from March 2007.

However, loans in excess of Rs 100,000 will have to comply with the 90-day norm by March 2005.

The introduction of the 90-day norm in phases was one of the suggestions made by co-operative bank representatives, who met the RBI governor Y V Reddy on September 2.

The central bank is also likely to layout dividend paying norms for urban cooperative banks, banking sources said. Representatives from the urban co-operative bank federation claimed the recent change in non-performing asset provisioning had lead to a substantial jump in net NPAs of most UCBs.

The net NPAs of select co-operative banks has more than doubled on account of this norm, said a co-operative bank chairman. This also lead to the RBI imposing directive on two Mumbai-based urban co-operative banks-South Indian Co-operative Bank Ltd and Maratha Mandir Co-operative Bank Ltd, he added.

The customer base, objective and area of working of co-operative banks are different, hence, its important that the regulator reviews the period for recognition of impaired loan for urban co-operative banks from 90 days to 180 days, said a banker.