Recently the Maharashtra Government has tweaked the norms of the one-time settlement (OTS) scheme to help Urban Cooperative Bank (UCBs) recover long-pending bad loans which has created enthusiasm amongst the office bearers of these banks.
While talking to this correspondent Vidyadhar V.Anaskar, President, Maharashtra Urban Cooperative Banks Federation hailed the move of the state government and said “With the implementation of the new scheme Urban Cooperative Banks would speedily recovery over Rs 10,770 crore”.
“Earlier, in a previous scheme there was lengthy process in recovering NPAs and banks needed the permission of the state government before applying the OTS scheme. Now the new provision in the OTS scheme would be helpful in tackling pending loans by fixing their settlement amount, he added.
Anaskar further added that “Being the apex body of Urban Cooperative Banks MUCBF last year took an initiative in this connection and handed over an amendment draft of the one time settlement scheme to the cooperative department. Now, the state government has given us approval which would help UCBs in a big way”.
According to the report published in Live Mint, “Under the revised norms, banks will be able to charge lower interest rate than the contracted amount in order to recover money from the non-performing assets (NPAs).
A floor of 8% per annum for three years from the date of a loan turning into an NPA has been set to push the recovery efforts, the official said. Earlier, UCBs were not allowed to take a hit on interest repayments even while dealing with stressed borrowers, which impeded their recovery efforts.
The government has also restricted the period for charging the interest to three years from the date of loan turning NPA. “Earlier, the interest used to be charged for more than three years making it more difficult for the borrower to repay. Now, the interest beyond three years will be waived off,” he said.
There are 507 UCBs in the state with about Rs 4 lakh crore deposits. The total borrowing from the UCBs is more than Rs1.5 lakh crore while the NPAs of these banks are worth Rs 10,770 crore, Anaskar informed.