Co-op banks get 90-day NPA waiver for small loans

The Reserve Bank of India has decided to exempt co-operative banks from the 90-day NPA provision, which was to come into effect from March 31, 2004, for small loans.

"In response to the difficulties expressed by urban co-operative banks and their federations in adopting the 90-day NPA norm in respect of the large number of small loans and gold loans granted by them, it is proposed to exempt both gold loans and small loans up to Rs 1 lakh (Rs 100,000) from the 90-day norm for recognition of loan impairment. These loans would continue to be governed by the 180-day norm for classification as NPA," the statement said.

The RBI has also allowed UCBs to place deposits with strong, scheduled UCBs with certain conditions. The central bank had asked UCBs in the policy statement of April 2001 not to increase the term deposit balances with other UCBs and the outstanding deposits to be unwound before end-June 2002.

The Credit Policy for 2003-03 has eased the ceiling on unsecured advances limits for UCBs.

"At present, a ceiling of Rs 25,000 for UCBs with demand and time liabilities (DTL) of less than Rs 10 crore (Rs 100 million) and Rs 50,000 for UCBs with DTL of Rs 10 crore and above has been prescribed."

"In order to provide greater flexibility, it is proposed to revise the ceiling on the unsecured advances by the UCBs. While non-scheduled UCBs with DTL of less than Rs 10 crore will now be allowed to lend Rs 50,000, non-scheduled UCBs with DTL of more than Rs 10 crore will be permitted to lend up to Rs 1 lakh (Rs 100,000). Scheduled UCBs will be allowed to lend up to Rs 2 lakh (Rs 200,000)," the statement said.

The aggregate of unsecured advances granted by an UCB to its members as a whole, the statement added, would continue to be unchanged and within the overall ceiling of 33 per cent of the bank's DTL.

The central bank has also said that UCBs, with immediate effect, should not grant loans and advances (both secured and unsecured) to directors, their relatives and firms/concerns/ companies in which they are interested.