regular-article-logo Wednesday, 04 October 2023

Monetary policy: RBI announces framework for compromise settlements, technical write-offs among lenders

RBI says compromise settlement will mean any negotiated arrangement with borrower to fully settle claims of RE against borrower in cash

Our Special Correspondent Mumbai Published 09.06.23, 04:58 AM
Representational image.

Representational image. File photo

The Reserve Bank of India (RBI) today announced a framework for compromise settlements and technical write-offs among lenders.

Technical or prudential write-off is the amount of non-performing or bad loans which are outstanding in the books of the branches but have been written off (fully or partially) at the head office level.


In its statement on developmental and regulatory policies which accompany the monetary policy statement, RBI said that while the `Prudential Framework for Resolution of Stressed Assets’ dated June 7, 2019 provides a broad principle-based framework, with a view to provide further impetus to the same, as well as to harmonise the instructions across all regulated entities, it will issue a comprehensive regulatory framework governing compromise settlements and technical write-offs covering all regulated entities.

RBI added that it will also rationalise the current prudential norms for implementation of resolution plans in respect of exposures affected by natural calamities, drawing upon the lessons from the resolution frameworks introduced during the Covid-19 pandemic.

The framework for compromise settlements and technical write off comes days after RBI Governor Shaktikanta Das flagged concerns over the re-emergence of the practice of ever-greening bad loans at some banks.

The framework will apply to Regulated Entities (REs) like banks, NBFCs including housing finance companies, small finance banks, RRBs, financial institutions and urban cooperative banks.

Here RBI said that these entities have to put in place Board-approved policies for undertaking compromise settlements with the borrowers as well as for technical write-offs.

It said that compromise settlement will mean any negotiated arrangement with the borrower to fully settle the claims of the RE against the borrower in cash.

RuPay cards go abroad

Mumbai: The Reserve Bank of India on Thursday decided to allow the issuance of RuPay prepaid forex cards by banks for use at ATMs, PoS machines and online merchants overseas.

RuPay debit, credit, and prepaid cards will be enabled for issuance in foreign jurisdictions, which can be used internationally, including in India, RBI governor Shaktikanta Das said.

"These measures will expand the reach and acceptance of RuPay cards globally," he said.

The decision comes given RuPay Debit and Credit cards issued by banks in India gaining international acceptance through bilateral arrangements with international partners and co-badging arrangements with international card schemes.

Meanwhile, the RBI is planning to make the central bank digital currency (CBDC) QR codes interoperable with the popular Unified Payment Interface (UPI), deputy-governor T. Rabi Sankar said on Thursday.


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