RBI/2004/266
RPCD.
No. Plan. BC. 92 / 04.09.01/ 2004-05
June 24, 2004
The
Chairman/ Managing Director/Chief Executive Officer
(All scheduled commercial
banks)
Dear Sir,
Flow
of Credit to Agriculture - Announcements made by the Union Finance Minister
The
Hon'ble Finance Minster, Government of India has announced certain measures for
improving flow of credit to agriculture, which are required to be implemented
by all scheduled commercial banks. Accordingly, banks may take action as under:
Relief
measures for farmers affected by natural calamities:
2.
Standing guidelines for providing relief to persons affected by natural calamities
have been issued to banks, vide our circulars Nos. RPCD. PS. BC. 6/ PS.126-84
dated August 2, 1984 and RPCD. PLFS. BC. 128/ 05.04.02/ 97-98 dated June 20, 1998.
These guidelines, inter alia, provide for conversion/ rescheduling of loans in
the case of crop failures due to natural calamities.
3.
In the light of measures announced by the Union Finance Minister, the debts as
on March 31, 2004 of farmers, who have suffered production and income losses on
account of successive natural calamities, i.e. drought, flood, or other calamities
which might have occurred in the districts for two or more successive years during
the past five years may be rescheduled/restructured by the banks, provided the
State Government concerned has declared such districts as calamity affected. Accordingly,
the interest outstanding/accrued in the accounts of such borrowers (crop loans
and agriculture term loans) up to March 31, 2004 may be clubbed with the principal
outstanding therein as on March 31, 2004, and the amount thus arrived at shall
be repayable over a period of five years, at current interest rates, including
an initial moratorium of two years.
4.
As regards the crop loans and agricultural term loans which have already been
restructured on account of natural calamities as per the standing guidelines,
only the overdue instalments including interest thereon as on March 31, 2004 may
be taken into account for the proposed restructuring.
5.
On restructuring as above, the farmers concerned will become eligible for fresh
loans. The rescheduled/restructured loans as also the fresh loans to be issued
to the farmers may be treated as current dues and need not be classified as NPA.
While the fresh loans would be governed by the NPA norms as applicable to agricultural
loans, in the case of rescheduled/restructured loans, the NPA norms would be applicable
from the third year onwards, i.e. on expiry of the initial moratorium period of
two years.
6. All other conditions/
stipulations contained in our circulars referred to in paragraph 2 above remain
unchanged.
One Time Settlement (OTS) Scheme for
Small and Marginal Farmers:
7.
The banks may formulate guidelines, with the approval of their Boards of Directors,
on one-time settlement for small and marginal farmers, who have been declared
as defaulters till the date of this circular and have become ineligible for fresh
credit. Banks may complete the exercise of notifying defaulters of the OTS guidelines
by September 30, 2004. All applications for OTS received from such defaulters
should be processed within one month of receipt of the same. The banks should
ensure that settlement is done without discrimination and in a transparent manner
so that farmers can access fresh credit.
Fresh
finance to farmers whose earlier debts have been settled
8.
Banks may review by September 30, 2004, all cases of small and marginal farmers
where credit has been denied on the sole ground that a loan account was settled
through compromise or write-offs.
Relief
measures for farmers indebted to non-institutional lenders:
9.
In order to mitigate the acute distress that farmers might be facing due to the
heavy burden of debt from non-institutional lenders (e.g. moneylenders) and to
provide them relief from such indebtedness, banks may, subject to the guidelines
to be approved by their Boards of Directors, advance loans to such farmers, against
appropriate collateral or group security.
10.
The above instructions and the guidelines to be formulated by your Board of Directors
may please be advised to your controlling offices and branches for immediate implementation.
11.
Banks are also advised to form a Task Force in their Head Office to review the
progress and collect relevant data in this regard on a monthly basis. The format
for the purpose of monitoring the progress is being sent separately.
12.
Please acknowledge receipt.
Yours
faithfully,
sd/-
(C.S.
Murthy)
Chief General Manager-in-Charge