Baghat coop bank clears OTS scheme amid deep NPA crisis

The Baghat Urban Cooperative Bank’s Board of Directors has approved its long-awaited one-time settlement (OTS) scheme, opening a limited window for loan defaulters to settle their dues. Under the scheme, borrowers can apply for a negotiated settlement by December 31, provided they pay 25 per cent interest. The bank has directed all branches to publicise the scheme widely in an effort to maximise participation.

Bank chairman Anil Sharma told the media that an aggressive recovery campaign launched on October 8 has begun to yield visible results. The bank’s non-performing assets (NPAs), he said, have come down from Rs 138 crore to Rs 129 crore within weeks. Sharma claimed the bank’s overall financial position would continue to improve as recovery remains its top priority. The number of loan defaulters has also fallen, from 499 on October 6 to 460 at present.

Since the Reserve Bank of India suspended the bank’s lending operations in April 2021, all existing NPAs belong to the pre-ban period. Even so, the bank’s figures remain alarming: its Gross NPA ratio is 47.10 per cent, signalling serious stress and undermining depositor confidence. By contrast, the ideal NPA ratio is close to zero, while a Gross NPA below 2 per cent is generally considered healthy. The bank’s Net NPA stands at 12.91 per cent.

Sharma urged defaulters to take advantage of the scheme, which not only allows scope for negotiation but also helps them avoid coercive measures such as arrest warrants. Those opting in must clear their dues within 90 days.

However, major uncertainties persist. A significant portion of the pledged assets is believed to be overvalued or marred by procedural lapses, raising doubts about the scheme’s effectiveness. Meanwhile, depositors, restricted to withdrawing only Rs 10,000, remain hopeful that meaningful recovery will eventually prompt the RBI to lift curbs.