ANDHRA PRAGATHI GRAMEENA BANK HEAD OFFICE :: KADAPA Circular No.155-2008-BC-CD Date:14.07.08 Guidelines for relief measures to farmers affected by natural calamities Attention of all branches and Regional Offices is invited to the captioned subject. Now and then Government of India / State Government / NABARD / RBI have been advising Banks to provide relief measures in areas affected by natural calamities. Rescheduling of existing dues is one of the relief measures to be extended to the farmers and others. After formation of Andhra Pragathi Grameena Bank. There are no clear guidelines regarding relief measures. Hence, it is felt necessary to issue comprehensive circular, incorporating the existing guidelines / instructions. GUIDELINES: 1. The periodical occurrence of droughts, cyclones, tidal waves and other natural calamities take a heavy toll of human life and wide spread damage to economic pursuits of the human beings in one place or other of the country. The devastation caused by such natural calamities call for massive rehabilitation efforts by all concerned. The developmental role assigned to RRBs warrants their active support/involvement in revival of the economic activities. 2. Since the area and time of occurrence and intensity of natural calamities cannot be anticipated, it is imperative that the banks have a blue print of action in such eventualities so that the required relief and assistance is provided with utmost speed and without loss of time. Keeping this in view, branches have to initiate action in the calamity affected areas immediately after the requisite declaration by the District/State authorities. 3. It is advisable to provide an element of flexibility in the relief measures and the parameters in this regard may be decided in accordance with the decisions of the SLBC/DCC. 4. To enable the Banks to take uniform and concerted action expeditiously, particularly to provide financial assistance to agriculturists, artisans and small business affected by natural calamities, the following guidelines are recommended. 5. To facilitate coordination and expeditious action by the financing institutions, the conveners of the DCC of the affected district should convene a meeting immediately after the occurrence of the natural calamity. In the event of the calamity causing a larger part of the state, the convenor of the SLBC will also convene a meeting immediately to evolve a coordinated programme of action for implementation of the programme in collaboration with the State/District authorities. While determining the quantum of assistance required by a person affected by the natural calamity, the Banks may take into consideration the assistance/subsidy received by him from the State Government or other agencies. Contd.2
Circular No.155-2008-BC-CD Date:14.07.08 : 2 : 6. IDENTIFICATION OF THE BENEFICIARIES: The branches should obtain list of affected villages within their area of operation from the Govt. authorities concerned. From among the identified persons, assessment of loss sustained by the existing constituents of the branch would be easier. In case of fresh borrowers, however, discrete enquiries should be made and assistance of the Govt. authorities should be sought wherever available for ascertaining the genuineness of their requirements. 7. PRIORITIES: The immediate assistance including finances would be needed for protecting and rejuvenating standing crops/orchards/plantations, etc. Equally important will be repairs to and protection of live stock sheds, grains and fodder storage structures, drainage, pumping and other measures and operations to repair pumpsets, motors, engines and other necessary implements subject to seasonal requirements, next crop financing should be taken up. 8. AGRICULTURAL LOANS: The branches should assist in the form of ST loans for raising crops and term loans for purchase of milch/draught animals, repairs to existing tube wells and pumpsets, digging of new tube wells/installing of new pumpsets, land reclamation, silt/sand removal, protection and rejuvenation of standing crops/orchards/plantations, repairs and protection of live stock sheds, grain and fodder storage structures, etc. 9. CROP LOANS: In case of natural calamities, the State Govt. would declare annewari based on the scientific assessment of crop yields in the affected areas. Wherever the annewari so declared is less than 6 annas i.e. the yield is less than 50% of the average yield in a normal year; the State Govt. will issue Annewari certificates in the prescribed format and also declare remission/ suspension of land revenue and other dues to the Govt. from the affected farmers so that the Banks could consider extending relief to the affected farmers by way of conversion/rephasement/ reschedulement of loans. However, where such declaration has not been made, banks should not delay in providing conversion facilities. The Banks may adopt the following procedure as an alternative to the system of Annewari declaration. The District Collector, on occurrence of the natural calamity such as drought, flood, etc. may ask the LDM to convene a meeting of the DCC and submit a report to the DCC on the extent of crop loss in the area affected by the natural calamity. If the DCC is satisfied that there has been extensive crop loss on account of the natural calamity, the relief including conversion/restructing facilities of agriculture loans as per the standing guidelines may be extended to the farmers affected by the natural calamity without declaring Annewari. Contd.3
: 3 : 10. GUIDELINES FOR PROVIDING CONVERSION FACILITIES: Circular No.155-2008-BC-CD Date:14.07.08 a) Branches may convert / rephase / reschedule the loan clubbed with interest amount of crop loans / instalments of term loans due in the year of occurrence of natural calamity from the affected farmers. b) In case of severe damage to crops as evidenced by the Annewari certificates of the State Govts. or certificate issued by DCC and accepted by SLBC/Task Force/Steering Committee constituted for the purpose, the amount of interest due from SF/MF in respect of the loans eligible for conversion/ rephasement could be deferred for one year. c) In respect of other farmers, the decision regarding deferment of interest will be communicated by Head Office taking into account the severity of damage. d) The period of conversion/rephasement to be granted may vary depending on the intensity of calamity and net extent of crop loss and distress caused to the farmers as indicated below. i) The short term loans due during the year of occurrence of the calamity to be converted into term loans for a period of 3 years and for SF/MF up to 5 years in the normal circumstances with moratorium of 2 years. ii) Where the calamity is for two successive years or where the damage is more than 75% of crop yield, Banks may at their discretion grant conversion/rephasement for period of 5 years with moratorium of 2 years. iii) Where the calamity is for three or more successive crop failures or where the damage is 100% of crop loss and the debt burden being found to be beyond the repaying capacity of the farmer, conversion/rephasement facility beyond 5 years can be considered but not exceeding 9 years with moratorium of 2 years. 11. The affected farmers, whose ST loans are converted into MT loans, have to be extended crop loans as per their eligibility, scale of finance, repaying capacity for raising crops. 12. The agricultural loans affected by natural calamities shall be governed by prudential norms and NPA classification fixed by RBI. 13. INVESTMENT CREDIT: The persons affected by natural calamity may be given the facility of restructuring / rescheduling of the existing loans and interest due clubbed together to be repaid over a period of 5 to 9 years with a moratorium of two years depending on the income generation and repaying capacity. Contd.4
Circular No. 155-2008-BC-CD Date:14.07.08 : 4 : In case where there is a partial/total loss of asset such as death of milch animal, destruction of poultry sheds, plantations and horticultural crops, branches may consider fresh loans to the existing borrowers for rehabilitation/replacement of asset/creation of asset. The insurance claims, if any, received will be adjusted towards the loan account and the restructuring/rescheduling facility will be restricted to the balance amount. 14. CONSUMPTION LOANS: The existing borrowers who suffered damage to crops and property need consumption loans for sustenance till the flow of income is resumed. Banks may extend general consumption loans up to Rs.1000/- to eligible persons in the areas affected by natural calamity. 15. ARTISANS AND SELF EMPLOYED PERSONS: The rural artisans, self employed persons, handloom weavers need assistance for repairs of sheds, replacement of implements and purchase of raw materials, etc. While sanctioning such loans, due allowance will be made for subsidy/assistance available from the State Government concerned. 16. SMALL SCALE & TINY UNITS: Rehabilitation of units under Village & Cottage Industry sector, SSI units will also need attention. Term loans for repairs to and renovation of factory buildings/sheds and machinery as also for replacement of damaged parts and working capital for purchase of raw materials and stores will need to be assisted. 17. Where the raw materials or finished goods have been washed away or ruined or damaged bank s security for working capital will naturally be eroded and the working capital account will be out of order. In such cases, Banks will convert drawings in excess of the value of security into a term loan and also provide further working capital to the borrower. 18. The term loan instalments will have to be suitably rescheduled keeping in view the income generating capacity of the unit and depending on the damage suffered and time needed for gesturing production and sales. The short falls in margins will have to be condoned or even waived and borrower should be allowed time to build up margin gradually from his future cash generation. Wherever State Govt. or any other agency has formulated special scheme for providing grants/subsidy/seed money, suitable margin may be stipulated to the extent of such grants/subsidy/seed money. The primary consideration before the branches in extending credit to a small/tiny unit for its rehabilitation should be the viability of the venture after the rehabilitation programme is implemented. 19. RATE OF INTEREST: As applicable to the Agricultural term loans as on the date of rescheduling. 20. SERVICE CHARGES: NIL Contd.5
Circular No. 155-2008-BC-CD Date:14.07.08 21.SANCTIONING AUTHORITY: : 5 : The conversion / rephasement can be done by the same functionary who have sanctioned earlier loan. If additional loan has to be sanctioned, sanctioning amount will be fixed taking into account the total limit (rephased / converted limit + new loan limit) 22. SECURITY/MARGIN: Security norms/margin to be followed as per RBI instructions from time to time. The security norms may be followed taking into account the original loan limit sanctioned irrespective of the loan outstanding. However, if any additional loan is granted, branches shall combine both the loan limits and follow the existing security norms. a) Upto a limit of Rs.50000/- : i) Surety (Rescheduled loan amount +other ii) Hypothecation of crop existing term loan) iii) No collateral security required b) Above Rs.50000/- : i) Collateral security to the extent of 150% of the loan amount required. ii) Surety iii) Hypothecation of crop. 23. DOCUMENTATION: Branch should obtain application from borrower and surety in AF-89 and obtain agreement (ADN-30) from the borrower and the same surety while rescheduling the loan. The agreement shall be got executed by the borrower as well as the existing surety of the previous loan account which is now rescheduled. However, substitution of surety can be accepted in genuine cases such as death, migration, prolonged illness, imprisonment, etc. Branch shall ensure that the new surety has good net worth. Branch should obtain a letter from the borrower along with the consent letter of the new surety and keep the same along with the loan document. In case of death of borrower, reschedulement shall not be done in favour of legal heirs. In all the cases, the old set of documents should also be kept with the new documents without exception. 24. INSURANCE RECEIPTS: In case crop insurance claims and any other insurance claims are received before extending rescheduling facility, the claim amount shall be adjusted to loan account and the rescheduling shall be restricted to the balance amount only. If insurance claim is received after extending the rescheduling facility, the insurance amount shall invariablitiy be adjusted to the rescheduled loan account. Personal Accident Insurance Scheme (PAIS) is not applicable for rescheduled term loan. However, for fresh KCCs sanctioned after reschedulement, PAIS is applicable. Contd.6
Circular No. 155-2008-BC-CD Date:14.07.08 25. ACCOUNTING: : 6 : a) After obtaining the loan agreement, the loan amount (including interest up to date) shall be transferred to a new loan account styled Converted Crop Loan (CCL) Account. Separate ledgers shall be opened for this purpose and separate serial number shall be given to new loan account like CCL 1/08, CCL 2/08 and so on. b) The following slips are to be passed while effecting the conversion: DEBIT : Converted Crop Loan Account CREDIT : Existing crop loan/cod/rac account c) Separate head of account shall be maintained in the General Ledger for Converted Crop Loans. Rephased term loans can also be accounted in a similar way. 26. OTHER GUIDELINES: a) The branches shall ensure that all the columns in the application, agreement, etc. are properly filled in. b) For all rescheduled loans, separate ledgers are to be maintained properly recording the revised repayment schedule including the moratorium period on the ledger folio. The previous loan account number shall also be recorded properly in red ink in brackets. c) In the original loan a/c ledger folio, the following line shall be written prominently in red ink : the loan is rescheduled on (date) and the rescheduled loan account number is. d) The rescheduled loan document shall invariably be kept alongwith the original loan documents. e) The process of obtaining Encumbrance Certificate once in a year and keeping mortgaged property inspection report on record at yearly intervals shall be continued in case of mortgage loans even after rescheduling also. f) All the rescheduled loans are to be covered under regular follow-ups at quarterly intervals as usual. g) The loans which are under the categories of LIC / Decreed Debts are not eligible for reschedulement. h) The farmers who have sold out their lands / assets created out of Bank loan are not eligible for reschedulement. Branches are advised to follow the policy guidelines noted above on the occurrence of natural calamity and avoid delay in taking relief measures to the affected farmers/borrowers in their respective area of operation without waiting for further instructions in future wherever needed. Clarifications, if any, regarding the circular, shall be sought from Credit Department, Head Office. (M.JAI PRAKASH) CHAIRMAN