Atul Khirwadkar, CEO of Kalyan Janata Sahakari Bank says the condition of UCBs in the country is pretty bad. He writes a letter explaining how the situation has come to such a pass. We reproduce the same verbatim-Editor
The present situation of urban cooperative banks in the state and the country is very precarious and bordering on to extinction. To wriggle out of the situation RBI must initiate/give following relief urgently.
1]Various UCBs have invested Rs.900 crores in PMC Bank. Almost 140 banks are facing the threat of extinction due to provisioning norms which currently requires 100% provisioning for default by PMC. Secondly few UCBs have discounted bills around Rs.300 crores accepted by PMC under letter of Credit issued by PMC.
These also are becoming NPA today attracting 100%provisioning. The RBI should immediately advise UCBs for deferring the Provisions for their exposure towards PMC bank from Prudential Norms this year which will enable these UCBs for postponing provisioning immediately. RBI may advise that the exposure towards PMC may be provided to the tune of 10% without classifying the exposure as NPA in its books.
2]The RBI has granted relief to the borrowers by deferring their EMIs from 1st March 2020 to 31st May 2020. However, there is no relaxation for not classifying these accounts as NPA if their overdue cross 90 days norms/period in the Month of March 2020. Thus, it is requested to have following relaxations granted as onetime measure:
2.1] NPA norms be changed to 180 days which would be brought back to 90 days in systematic manner – Jun’20 – 180 days, Sep’20 – 150 days, Dec’20 – 120 days and Mar’21 – 90 days;
2.2] Provision on NPAs can be spread over in next five quarters with Mar’20 being the first quarter which will ease out the burden of provision of BDDR on banks;
2.3] The criteria of applicability of SAF and SFWM norms be dispensed off for FY: 2019-20 and can be adopted based on Mar’19 financials which will enable banks to gear up by Mar’21;
2.4] Though the present RBI guidelines does not permit a bank to consider ‘subsequent recovery’ for regularisation of NPAs, one-time relaxation may be given to consider recoveries made in the account till June 30, 2020 towards regularisation of NPAs;
3]In general for the Banking sector the need of the hour is to extend the computation period of NPAs from 90 days to 180 days for 5 quarters beginning from 31st March 2020 to 31st March 2021.
Thanks, and Regards
CEO, Kalyan Janata Sah Bank