Need for New Norms arises as some banks were not recognizing required provisions for Non-Performing Assets (NPAs) as an expense. 

• These new norms (applicable to Urban, state and central co-operative banks) will bring uniformity in treatment of Bad & Doubtful Debt Reserve (BDDR). 
  • Several co-operative banks established BDDR for financial stability (For managing bad loans).

New Norms:

• All provisions (related to “BDDR” or other head) under Income Recognition, Asset Classification, and Provisioning (IRACP) norms must be charged as an expense to Profit and Loss Account.
• After accounting for all provisions as per IRACP norms and other regulations, co-operative banks may make appropriations of net profits to BDDR.

Co-operative Banks:

• Works on principle of cooperation and are owned and operated by their members.
• Can be divided into Rural and Urban co-operative banks.

Issues with co-operative Banks:

• Regional Disparity: Almost 82 per cent of total UCBs and around 90 per cent branches of all UCBs are concentrated in Western and Southern regions of country (2020).
• Dual Regulation: Managerial, administrative activities are overseen by state governments while banking activities are regulated and supervised by RBI /NABARD.
• Other issues: Inadequate avenues for raising capital, High Gross NPAs etc.