RBI 2009-10/371
DBOD.No.BP.BC. 82 /21.04.048/2009-10
March 30, 2010
The Chairman / CMD / MD / CEO
All Scheduled Commercial Banks (including Local Area Banks)
(Excluding RRBs)
Dear Sir
Agricultural Debt Waiver and Debt Relief Scheme, 2008 – Prudential Norms
on Income Recognition, Asset Classification, Provisioning and Capital Adequacy
Please refer to our circulars DBOD.No.BP.BC.26/21.04.048/2008-09 dated July 30,
2008, DBOD.No.BP.BC.112/21.04.048/2008-09 dated March 5, 2009,
DBOD.No.BP.BC.140/21.04.048/2008-09 dated June 25, 2009, and
DBOD.No.BP.BC.35/21.04.048/ 2009-10 dated August 31, 2009 on the captioned
subject.
- In terms of the circular dated August 31, 2009, we had advised that the
Government of India had decided to make the accounts of “other farmers” eligible
for a debt relief of 25% from Government of India, provided they pay their
entire share of 75% by December 31, 2009.
- In view of the recent drought in some States and the severe floods in some
other parts of the country, the Government of India, as announced in the Union
Budget 2010-11, has now decided to extend the last date of payment of 75% of
overdue portion by the ‘other farmer’ under Debt Relief Scheme (under ADWDR) for
another six months beyond December 31, 2009, i.e up to June 30, 2010. The
eligible “other farmers” may be allowed to repay this amount in one or more
instalments up to June 30, 2010.
- The Government of India has also advised that the banks / lending
institutions are allowed to receive even less than 75% of the eligible amount
under OTS provided the banks / lending institutions bear the difference
themselves and do not claim the same either from the Government or from the
farmer. The Government will pay only 25% of the actual eligible amount under
debt relief.
- The Government has once again clarified that the lending institutions would
not charge any interest on the eligible amount for the period from February 29,
2008 to June 30, 2009. However, they may charge normal rate of interest on the
eligible amount from July 01, 2009 up to the date of settlement. Further, no
interest shall be paid by the Government of India to the lending institutions
for this six month extension under the Scheme while reimbursing the 25% amount
to the lending institutions as per the delayed reimbursement schedule.
- Where the farmers covered under the Debt Relief Scheme have given the
undertaking, agreeing to pay their share under the OTS, their relevant accounts
may be treated by banks as "standard" / "performing" provided :
(a) adequate provision is made by the banks for the loss in present value (PV)
terms for all the receivables due from the borrowers. (For computing the amount
of loss in PV terms under the Scheme, the balance amount receivable from the
farmers may be assumed to be due on June 30, 2010, and the interest payments
would be as per paragraph 5 above. The cash flows should be discounted to the
present value at the interest rate at which the loan was granted including the
element of interest subsidy, if any, available from the Government.)
(b) such farmers pay their share of the settlement latest by the revised last
date, i.e. June 30, 2010.
- In case, however, the payments are delayed by the farmers beyond June 30,
2010, the outstanding amount in the relevant accounts of such farmers shall be
treated as NPA. The asset classification of such accounts shall be determined
with reference to the original date of NPA, (as if the account had not been
treated as performing in the interregnum based on the aforesaid undertaking). On
such down-gradation of the accounts, additional provisions as per the extant
prudential norms should also be made.
- The accounting treatment for the Debt Relief Scheme as indicated in paragraph
6 of our circular dated August 31, 2009, may continue to be followed.
- All other terms of the aforesaid circulars including provisioning remain
unchanged.
Yours faithfully
(B. Mahapatra)
Chief General Manager