KCC When It Will Be NPA

MC of RBI dt. 01-07-2013 says 4.2.13 Agricultural advances i. A loan granted for short duration crops ill !e treated as "#A$ if the instal%ent of principal or interest thereon re%ains o&erdue for to crop seasons. A loan grant gra nted ed fo forr lo long ng dur durat atio ion n cro crops ps i ill ll !e tr treat eated ed as "# "#A$ A$ if th the e in inst stal al%e %ent nt of princi pri ncipa pall or in inte teres restt th there ereon on re re%a %ain ins s o& o&erd erdue ue fo forr on one e cr crop op sea seaso son. n. 'o 'orr th the e purpose of these guidelines$ (long duration) crops ould !e crops ith crop season longer than one year and crops$ hich are not (long duration) crops$ ould !e treated as (short duration) crops. *he crop season for each crop$ hich %eans the period up to har&esting of the crops raised$ ould !e as deter%ined !y the +ta +tate te ,e& ,e&el el Ban Baners ers Co% Co%%it %ittee tee in eac each h +ta +tate. te. /ependin /epending g upo upon n the duration durati on of crops raised !y an agricu agriculturi lturist$ st$ the a!o&e "#A nor%s ould also !e %ade applica!le to agricultural ter% loans a&ailed of !y hi%. *he a!o&e nor%s should !e %ade applica!le to all direct agricultural ad&ances.

 And direct ad&ance ad&ance list includes includes CC. In a!o&e para phrase used instal%ent of principal or interest thereon In a CC there %ay !e li%it of 2 types as per RBI circular dated 11-020124 .1.1. *he short term limit to limit  to !e arri&ed for the first year5 'or far%ers raising single crop in a year5 +cale of finance for the crop as decided !y /istrict ,e&el *echnical Co%%ittee4 6 6tent of area culti&ated 8 109 of li%it toards posthar&est : household : consu%ption re;uire%ents 8 209 of li%it toards repairs and %ai %ainte ntenan nance ce e6p e6pens enses es of far far% % ass assets ets 8 crop insuranc insurance$ e$ #AI #AI+ + < asse assett insurance. .1.=. Term loans for investments toards investments toards land de&elop%ent$ %inor irrigation$ purchase of far% e;uip%ents and allied agricultural acti&ities. *he !ans %ay fi6 the ;uantu% of credit for ter% and ori oring ng capital li%it for agricultural and allied acti&ities$ etc.$ !ased on the unit cost of the asset:s proposed to !e ac;uired !y the far%er$ the allied acti&ities already !eing undertaen on the far%$ the !ans  >udg%ent on repay%ent capacity &is-a-&is total loan !urden de&ol&ing on the far%er$ including e6isting loan o!ligations.

and para .1.7 +tates 5.1.7. Fixation of Sublimits for other than !arginal Farmers" i. +ho +hort rt ter ter% % loa loans ns and ter% loa loans ns are go& go&erne erned d !y dif differ ferent ent interest interest rates. Besides$ at present$ short ter% crop loans are co&ered under Interest +u!&ention +che%e: #ro%pt Repay%ent Incenti&e Incenti&e sche%e. 'urther$ repay%ent schedule and nor%s are different for short ter% and ter% loans. ?ence$ in order to ha&e operational and accounting con&enience$ the card li%it is to !e !ifurcated into

separate su! li%its for short ter% cash credit li%it cu% sa&ings account and ter% loans. ii. #ra$ing limit for short term cash credit should !e fi6ed !ased on the cropping pattern and the a%ounts for crop production$ repairs and %aintenance of far% assets and consu%ption %ay !e alloed to !e dran as per the con&enience of the far%er. In case the re&ision of scale of finance for any year !y the district le&el co%%ittee e6ceeds the notional hie of 109 conte%plated hile fi6ing the fi&e year li%it$ a re&ised draa!le li%it %ay !e fi6ed and the far%er !e ad&ised a!out the sa%e. In case such re&isions re;uire the card li%it itself to !e enhanced =th or th year4$ the sa%e %ay !e done and the far%er !e so ad&ised. For term loans% installments %ay !e alloed to !e ithdran !ased on the nature of in&est%ent and repay%ent schedule dran as per the econo%ic life of the proposed in&est%ents. It is to !e ensured that at any point of ti%e the total lia!ility should !e ithin the draing li%it of the concerned year. 7.As the && limit and the term loan limit are t$o distinct com'onents of the aggregate card limit !earing different rates of interest and repay%ent periods$ until a co%posite card could !e issued ith appropriate softare to separately account transactions in either su! li%its$ to separate electronic cards %ay !e issued.

#ara =.2.13 see%s to !e dealing ith (term loan limit( as it is saying )nstallment of 'rinci'al or interest thereon% and not for short term limit hich is in the nature of CC li%it$ for this RBI circular 11-02012 says 14. &lassification of account as *+A" 1=.1. @ith a &ie to si%plifying asset-classification$ the Co%%ittee has reco%%ended that an account could !e treated as (standard)$ hen the !alance outstanding is less than or e;ual to draing li%it ,short term -cro' loan/ at any point of ti%e during the preceding one year. In other ords$ it is suggested that the short term loan -$ith ma0or com'onent of cro' loan  sanctioned on the CC can !e gi&en the same treatment as a cash credit account for the 'ur'ose of a''ling 'rudential norms and should not !e treated as (out of order) if the !alance outstanding is less than or e;ual to the draing li%it and each dral is repaid ithin a period of 12 %onths. Term loan under && has fi6ed repay%ent schedule and is to !e go&erned !y e6tant prudential nor%s.

*he a!o&e para stand re&ised !y RBI !y circular dated 07-0-2012 as under  14. &lassification of account as *+A" 1=.1 *he extant 'rudential norms for inco%e recognition$ asset-classification and pro&isioning ill continue to apply for loans granted under re&ised CC +che%e.

Conclusion5 In %y opinion$ .e.f. 07-0-2012$ (6tant #rudential "or%s) of IRAC (Continue to Apply) infers that (+hort *er% Crop ,oan) under CC ill !e go&erned !y IRAC nor%s as applica!le to nor%al CC account and (*er% ,oan) under CC ill !e go&erned !y IRAC nor%s gi&en in para =.2.13 of MC. 'inion of others members are $elcome