Cooperative banks face challenges on compromise settlements, say experts

The Framework for Compromise Settlements and Technical Write-offs introduced by the Reserve Bank of India may pose policy and regulatory challenges for some cooperative banks, mainly small urban cooperative banks (UCBs), because they lack the professional expertise, experts said.

A compromise settlement refers to an arrangement between a borrower and a bank, where a loan is cleared by paying a smaller amount than what is due.

“UCBs and mainly some small UCBs may have issues in dealing with the compromise settlements framework as they lack professional experience on the policy front when compared to bigger UCBs,” said NS Vishwanathan, former deputy governor of the RBI who also headed a committee on cooperative banks.