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In
terms of National Disaster Management Framework, there are two funds
constituted viz. National Disaster Response Fund and State Disaster Response
Fund for providing relief. This framework currently recognizes 12 types of
natural calamities viz. cyclone, drought, earthquake, fire, flood, tsunami,
hailstorm, landslide, avalanche, cloud burst, pest attack and cold wave/frost. Ministry
of Agriculture is the nodal ministry for 4 of these calamities i.e. drought,
hailstorms, pest attack and cold wave/frost, while for remaining 8 calamities
Ministry of Home Affairs is required to make appropriate arrangements.
The banks’
contribution in providing relief relates to rescheduling of existing loans and
sanctioning of fresh loans. The precise details regarding such assistance will
depend on the situation, their operational capabilities and the actual needs of
the borrowers.
Establishing
Policy/Procedures for dealing with Natural Calamities
Banks should
have a blueprint of action for such eventualities so that relief and assistance
is provided immediately with utmost speed. Required instructions should also be
available with the State Government authorities and all the District Collectors
so that everyone is clear about the action that would be taken by the banks in
the affected areas.
Discretionary
Powers to Divisional / Zonal Manager of banks
Zonal Managers
of banks should be vested with certain discretionary powers so that they do not
have to seek fresh approvals to the line of action agreed to by the DCC/SLBC.
Meetings of
State Level Bankers’ Committee/District Consultative Committee
In the event of
the calamity covering entire State/ larger part of a State, the convener of the
SLBC will convene a meeting immediately to evolve a coordinated action plan for
implementation of the relief programme in collaboration with the State
Government authorities. However, in case the calamity has affected only a small
part of the State, the conveners of the DCC should convene the meeting
immediately.
Wherever the
calamity is very severe, the relief measures may be reviewed periodically in
the weekly/fortnightly meetings of specially constituted Task Forces or sub
Committees of the SLBC till the conditions are normalized.
Declaration of
natural calamities is in the domain of the Central/State Governments. There are
no uniform procedures for declaration of natural calamity. Nevertheless, the
common thread to extend relief measures is that the crop loss assessed
should be 33% or
more.
Distinction
between Drought and Other Calamities
So far as
Drought is concerned, a couple of States are following the advanced methodology
based on the data of rainfall, crop area sown, vegetation index, moisture
adequacy index along with other parameters as suggested in the ‘Manual for
Drought Management’ released by the Ministry of Agriculture. In the
circumstances, it is considered appropriate to make distinction between (i)
Drought (which is generally a slowly evolving calamity and can aggravate or
reverse as per the rainfall during the period; and (ii) Other Calamities which
are physiologically different from Drought and are of a sudden nature;
Drought : As the ‘Manual
for Drought Management’ commends certain guidelines for the State
Governments to assess the situation, the State Governments may either:
i)
adopt
the procedures indicated in the Manual and based on the various parameters,
decide on the declaration of drought. Such declarations should elaborately
indicate the data/procedures relied upon and the extent of crop loss.
ii)
Conduct
Crop Cutting Experiments as prescribed in the National Agriculture Insurance
Programme, and declare the ‘Annewari’ (by whatever name called) indicating the
crop-wise percentage loss in the certificates issued. State Governments need to
submit detailed taluka/block/district wise crop loss data to Central Government
if they seek any funds for relief work
Other
Calamities :
The loss should be assessed through crop cutting experiments indicating
that the crop loss in the particular area has been 33% or more to trigger
reschedulement of loans.
In case of
extreme situations when it is largely clear that most of the standing crops, land
and other assets have suffered wide-spread damage, the State Government/District
Authorities in the SLBC/DCC meeting may explain the reasons for taking the
decision to provide relief on the basis
of eye estimate alone.
In both the
cases, however, DCCs/SLBC have to satisfy themselves that the crop loss has
been 33% or more before acting on these pronouncements.
Restructuring/Rescheduling
of Existing Loans
Agriculture
Loans
Short-term
Production Credit (Crop Loans)
All
short-term loans, except the overdue ones, will be eligible for restructuring.
The principal and interest due in the year of occurrence of the calamity may be
converted into term loan.
The repayment
period will depend on the severity of calamity and its recurrence, the extent
of loss of economic assets and distress caused.
·
Max
of 2 yrs (including moratorium of 1 yr)
if the loss is between 33% and 50%.
·
Max
of 5 yrs (including moratorium of 1 yr)
if the loss is more than 50%.
Moratorium
of at least 1 year should be considered and the banks should not insist for
additional collateral for such loans.
The
existing installments will have to be rescheduled keeping in view the repaying
capacity of the borrowers and the nature of natural calamity :
a)
Where
only crop for that year is damaged and not the productive assets.
b)
Where
the productive assets are partially or totally damaged and borrowers are in
need of a new loan.
Under
category (a), banks may reschdeule the repayment during the year of natural
calamity and extend the loan period by one year. Installments defaulted
wilfully will not be eligible for rescheduling. The banks may also have to
postpone payment of interest.
Under
category (b), rescheduling may be determined on the basis of the overall
repaying capacity less the subsidies, compensation, etc. While the total
repayment period will differ on case-to-case basis, generally it should not
exceed 5 years.
Other Loans
A
view needs to be taken by SLBC/DCC whether a general reschedulement of all
other loans is required. If such a decision is taken, banks will have to assess
the requirement of the individual borrowers on case to case basis.
Asset
Classification
a)
The
restructured portion may be treated as current dues and need not be classified
as NPA. Nevertheless, banks are required to make higher provisions for such
restructured standard advances.
b)
The
classification of the remaining amount, will be governed by the original terms
and conditions.
c)
Additional
finance, if any, may be treated as “standard asset” and its future asset
classification will be governed by the terms and conditions of its sanction.
The
benefit of asset classification of the restructured accounts will be available
only if the restructuring is completed within 3 months from the date
of natural calamity. In the event of extreme calamity, banks should immediately
approach RBI giving the reasons for seeking extension.
The
accounts that are restructured for the second time or more on account of
natural calamities would retain the same asset classification category on
restructuring. All other restructuring norms, however, will apply.
Utilisation of
Insurance Proceeds
While
restructuring the loans in the affected areas, banks should also take into account
the insurance proceeds, if any, receivable from the Insurance Company. They
should adjust these proceeds to ‘restructured accounts’. It should
be done in cases where they have granted fresh loans to the borrowers. However in view of the difficulties faced by the farmers, banks are advised to consider restructuring and granting fresh loans without waiting for the claim, where there is reasonable certainty of receipt.(Updated as on 30/06/16)
Sanctioning of
Fresh Loans
Once
the decisions on the rescheduling is taken, pending such conversion of
short-term loans, banks may grant fresh crop loans based on the scale of
finance for the particular crop and the cultivation area.
Bank
assistance in relation to agriculture and allied activities would also be
needed for long term loans. Similarly, affected rural artisans, self-employed
persons, micro and small industrial units, etc. may require credit to sustain
their livelihood. Banks may assess and decide on the quantum of fresh loans to
be granted on their own.
Banks
may also grant consumption loans up to Rs. 10,000/- to existing borrowers
without any collateral. The limit may be enhanced at the discretion of the
bank.
Terms and
Conditions
Guarantee,
Security and Margin
Credit
should not be denied for want of personal guarantees. Where the bank’s existing
security has been eroded because of the calamity, assistance will not be denied
merely for want of additional fresh security.
Where the crop
loan (which has been converted into term loan) was earlier given against
personal security/ hypothecation of crop, he should not be denied conversion
facility merely on the ground of his inability to furnish land as security. If
the borrower has already mortgaged his land, the bank should
be content with a second charge. Banks should not insist on third party
guarantees for providing conversion facilities.
Where
land is taken as security, in the absence of original title records, a
certificate issued by the Revenue Department officials may be accepted for
financing farmers who have lost proof of their titles.
Margin
requirements may be waived or the grants given by the concerned State
Government may be considered as margin.
Rate of Interest
The rates of
interest will be as per the directives of RBI. In respect of current dues in default, no
penal interest will be charged. The banks should also suitably defer the
compounding of interest charges. Banks may consider waiving penal interest,
already charged in regard to the loans converted/rescheduled.
Depending on the
nature and severity of natural calamity, the SLBC/ DCC shall take a view on the
interest rate concession so that there is uniformity in approach among banks in
providing relief.
Other Ancillary
Relief Measures
Know Your
Customer Norms - Relaxations
Where the
affected persons are not able to provide standard identification documents, banks
may resort to non-documentary verification methods. They can open a small
account based on the photograph and signature or thumb impression in front of
the bank official. The balance in such account should not exceed Rs. 50,000/-
or the amount of relief granted (whichever is higher) and the total credit in
the account does not exceed Rs. 1,00,000/- or the amount of relief granted, (whichever
is higher) in a year.
Where the bank
branches are affected, banks may operate from temporary premises, (including satellite
offices, extension counters or mobile banking facilities) under advice to RBI.
For continuing the temporary premises beyond 30 days, specific approval may be
obtained from RBI.
To satisfy
customer’s immediate cash requirements, banks may consider putting in place
arrangements for allowing their customers to access other ATM networks, Mobile ATMs,
etc.
banks
may at their discretion allow waiving ATM fees, increasing ATM withdrawal
limits; waiving overdraft fees; waiving early withdrawal penalties on time
deposits; waiving late fee for credit card/other loan installment payments and
giving option to credit card holders to convert their outstanding balance to
EMIs repayable in 1 or 2 years. Besides, all charges debited to the farm loan
account other than the normal interest may also be waived.
Applicability of
the guidelines in the case of riots and disturbances
Whenever
RBI advises the banks to extend rehabilitation assistance to the riot affected
persons, the aforesaid guidelines may broadly be followed by banks. However, only
persons, duly identified by the State Administration are to be provided such assistance.
The
District Collector, on occurrence of the riots/ disturbances, may ask the Lead
Bank Officer to convene a meeting of the DCC, if necessary and submit a report
to the DCC on the extent of damage caused to life and property. If the DCC is
satisfied with the extent of loss, the relief may be extended to the affected people.
Where
there are no DCCs, the District Collector may request the
convener of the SLBC to convene a meeting of the bankers to consider extension
of relief to the affected persons. A copy of the proceedings of the meeting may
be forwarded to the concerned Regional Office of the Reserve Bank of India.
Based on RBI
Circular dt 01/07/15. Updated upto 30/06/16. Please visit www.rbi.org.in for any
further clarification if required….. Poppy
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