OTS system to be implemented in Odisha’s cooperative banks to ease NPA burden

Bhubaneswar: The Odisha Government has decided to implement ‘One Time Settlement’ (OTS) provision in cooperative banks to reduce the burden of gross non-performing assets of cooperative banks and primary Agricultural Cooperative Societies.

The Cooperative Department has given formal approval to implement this system in Odisha State Cooperative Bank, District Central Cooperative Bank, Urban Cooperative Bank and Primary Agricultural Cooperative Society. This move will increase the asset quality of these institutions and has resolved the long-standing demand of cooperative banks.

Through this model scheme, banks can modify and implement it as per their financial needs with the approval of the Management Committee. The OTS scheme will be implemented for a period of six months from April 1 to October 30 of each financial year and the cut-off date for this OTS scheme, which will be implemented in the financial year 2025-26, has been fixed as March 31, 2023.

According to an official release, all loans given by cooperative banks as on the cut-off date, which have taken the form of doubtful or loss assets, will be considered eligible for OTS and short-term crop loans given by PACS/LAMPS, fully secured loans, gold loans, loans under tie-up arrangements and loans taken by wilful defaulters will not be covered under this scheme.

A screening committee will be formed by each bank to verify the eligibility of the borrower and individual officers of the bank will be given financial authority to approve all eligible proposals. The proposals will then be reviewed by higher authorities. Loans with book liabilities up to Rs. 25 lakh can be covered under this scheme. For PACS’ the limit has been fixed at Rs. 3 lakh.

The assets have been divided into different categories based on their size and quality and accordingly, compromise solutions have been suggested and the debts covered under any legal proceedings may also be considered for resolution under this scheme.

No borrower can claim OTS as his/her own right. It is up to the bank to accept or reject the borrower’s OTS proposal. A person availing the benefits of OTS will not be eligible for a new loan for a minimum of 3 years after the final settlement of their previous loan. There is a mechanism for grievance redressal under this scheme which has been kept open for further revision and review of the scheme.
This meant that any constructive suggestion given by the bank will be considered and accepted, the release said.

Notably, Due to the non-availability of OTS scheme for a long time, the bad loans, gross non-performing assets/loans of cooperative banks had increased significantly.