Reserve Bank Governor Shaktikanta Das on Wednesday asked urban cooperative banks to go for rigorous follow-up of large NPA borrowers for effective recovery, and not to camouflage their actual financial position by innovative accounting practices.

In a statement, the RBI said 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.

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 RBI further said the governor stressed that the quality of governance was the most important aspect in ensuring stability of individual banks and urged the Directors of UCBs to further strengthen governance practices

Going forward, the Reserve Bank would be convening similar Conferences of Directors on Boards of other Urban Cooperative Banks in other regions of the country.

Deputy governors M Rajeshwar Rao and Swaminathan J, along with executive directors representing the RBI's Departments of supervision, regulation and enforcement, and other senior officials, also participated in the Conference.