‘Accused of unprofessionalism by RBI’: Fewer UCBs had debt write-offs in last 2 years, show RTI records

In response to an RTI query by The Indian Express, the RBI stated that while 58 of the 447 UCBs had reported bad loan write-offs in the financial year 2014-15, only 48 of 280 UCBs had reported such write-offs

Written by Partha Sarathi Biswas | Pune | Published: December 8, 2016 4:55 am
demonetisation, RBI, Gross Value Added (GVA), Specified Bank notes, fiscal policy, India fiscal policy, RBI governor, indian express news RBI has reduced the policy rate by 1.75 per cent since January 2015. (Source: File)

Even as Urban Cooperative Banks (UCBs) continue to reel under cash shortage due to the restrictions imposed on them by the RBI, RTI documents accessed by Pune Newsline show that the UCBs had fewer bad loan write-offs than commercial banks.

In response to an RTI query by The Indian Express, the RBI stated that while 58 of the 447 UCBs had reported bad loan write-offs in the financial year 2014-15, only 48 of 280 UCBs had reported such write-offs in the financial year 2015-16. Bad debt write-offs has been a major issue plaguing the banking sector. Banks remove bad loans from their balance sheets when the chances of recovering such loans appear to be slim. The RBI’s website says: ‘Writing off’ of non-performing assets is a regular exercise conducted by banks to clean up their balance sheets”.

Like other banks, UCBs are mandated to report details about their non-performing assets as well as write-offs to the RBI at the end of the financial year. The RBI’s response to the RTI showed that in the financial year 2014-15, there were 447 reporting UCBs, and in the next financial year, 2015-16, there were 280 UCBs. The cumulative write-offs for both years was Rs 173 crore, of which Rs 113 crore was for 2014-15 and Rs 60.53 crore was written off during financial year 2015-16.

As per the data, almost 10 per cent of the UCBs had reported reduction of their non-performing assets (NPAs) from 2014-15 to 2015-16. Majority of the banks had write-offs running in lakhs, while some banks had write-offs limited to thousands.

Since the Centre introduced demonetisation, the UCBs have complained of step-motherly treatment by the RBI and the currency chests, in terms of distribution of cash. In its affidavit in the Supreme Court, the RBI had raised objections regarding the functioning of the cooperative banks, and the UCBs had strongly objected to the central bank’s contention.

Vidyadhar Anaskar, president of the Maharashtra Urban Cooperative Banks Federation, said, “The RBI singling out UCBs, on alleged charges of non-professionalism, is wrong,” said Anaskar. After demonetisation, the UCBs have come under the RBI’s scrutiny; the central bank had initially refused to allow cooperative banks to undertake exchange of old currency. The income tax department had also conducted raids in various UCBs.

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