MUMBAI: Reserve Bank Governor Shaktikanta Das on Wednesday asked urban cooperative
banks to go for rigorous follow-up of large NPA (non performing asset) borrowers for effective recovery, and not to camouflage their actual financial position by innovative accounting practices.
The Governor held a conference of directors on the boards of select large urban cooperative banks (UCBs) in Mumbai Zone. The Reserve Bank has started engaging with the directors of its regulated entities functioning in different segments of the financial system. Two separate conferences were held with directors on boards of public sector banks and private sector banks in May 2023.
The governor reinforced the need for board’s involvement in upholding rigorous credit risk management including robust underwriting standards, effective post sanction monitoring, timely recognition and mitigation of incipient stress, rigorous follow-up of large NPA borrowers for effective recovery, and maintaining adequate provisioning.
“He emphasised that the role of Directors is very significant in ensuring the integrity and transparency of financial statements, and cautioned against use of innovative accounting practices to camouflage the actual financial position,” the central bank said in a statement. Das urged the Boards to be more proactive in asset liability management and the necessity of managing liquidity risk in a more systematic manner.
He also stressed that the Board’s role is pivotal in establishing a robust IT and cybersecurity infrastructure and availability of requisite skills at the bank level. He emphasied the management of the UCBs should enjoy the required autonomy in their functioning. The governor stressed that the quality of governance was the most important aspect in ensuring stability of individual banks.