The Hindu Business Line : Banks told to implement farm credit package

THE Reserve Bank of India has directed all commercial banks to abide by the recent measures announced by the Finance Minister for improving the flow of credit to agriculture.

In a circular issued to the chiefs of all commercial banks, the apex bank said, in the light of measures announced by the Union Finance Minister, the debts of farmers, as on March 31, 2004, who have suffered production and income losses on account of successive natural calamities or other calamities which might have occurred in the districts for two or more successive years during the past five years may be rescheduled or 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.

With respect to 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.

On restructuring of the loans, the farmers concerned will become eligible for fresh loans. The rescheduled or 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 will be governed by the NPA norms as applicable to agricultural loans, in the case of rescheduled or restructured loans, the NPA norms will be applicable from the third year onwards, i.e. on expiry of the initial moratorium period of two years.

The RBI has also said that banks may formulate guidelines on one-time settlements for small and marginal farmers who have been declared as defaulters and have become ineligible for fresh credit.

The 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.

The 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.

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.

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