Agricultural Advances Affected by Natural Calamities
Paragraph 4.2.13 of the Master Circular deals elaborately with the classification and income recognition issues due to impairment caused by natural calamities. Banks may decide on their own relief measures, viz., conversion of the short term production loan into a term loan or reschedulement of the repayment period and the sanctioning of fresh shortterm loan, subject to the guidelines contained in RBI’s latest Master Circular on “Prudential Norms on Income Recognition, Asset Classification and Provisioning Pertaining to Advances” dated July 1, 2015 and guidelines contained in RBI FIDD.No.FSD.BC.01/05.10.001/2015-16 dated July 1, 2015 on“Guidelines for Relief Measures by Bank in Areas Affected by Natural Calamities”. In such cases the NPA classification would be governed by such rescheduled terms.
In such cases of conversion or re-schedulement, the term loan as well as fresh short-term loan may be treated as current dues and need not be classified as NPA. The asset classification of these loans would thereafter be governed by the revised terms & conditions and would be treated as NPA if interest and/or instalment of principal remain overdue for two crop seasons for short duration crops and for one crop season for long duration crops. For the purpose of these guidelines, “long duration” crops would be crops with crop season longer than one year and crops, which are not ‘long duration” would be treated as “short duration” crops.
While fixing the repayment schedule in case of rural housing advances granted to agriculturist under Indira Awas Yojana and Golden Jubilee Rural Housing Finance Scheme, banks should ensure that the interest/ instalment payable on such advances are linked to crop cycles.