Agricultural Advances Affected by Natural Calamities :
Paragraph 4.2.13 of the Master Circular – Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances
dated July 1, 2015 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 re-schedulement of the repayment period
and the sanctioning of fresh short-term 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 directions contained in RBI Master Direction
FIDD.No.FSD.BC.02/05.10.001/2016-17 dated July 1, 2016 on “Master Direction – Reserve Bank of India (Relief Measures by Banks in Areas Affected by Natural Calamities) Directions, 2016”. 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.