2. In the context of the experience gained by banks in implementation of the said guidelines, on a review, it has been decided to liberalise the existing guidelines by delegating more powers and discretion to banks in relation to operational aspects and extension of relief to the affected borrowers (farmers) expeditiously. This will enable banks to take timely remedial measures as per the parameters laid down in the guidelines, in a given situation without reference to RBI. The guidelines have been framed with an object to enable the banks to exercise their judicious discretion and decide on the adequacy of relief measures to be provided, depending on the intensity of the natural calamity, the extent of damage to crops and distress caused to farmers in one or more years. Accordingly, the standing guidelines issued to banks in terms of our above mentioned circular, will stand modified to the extent as stated hereinafter:
i) Banks may, of their own, decide the quantum of fresh loans to be granted to the affected borrowers taking into consideration, amongst others, the extent of the crop loss/scale of finance and their repaying capacity.
ii) Amount of principal as well as interest in respect of short-term loans due in the year of occurrence of natural calamity may be converted into term loans or the repayment period may be rescheduled suitably. The period of conversion/reschedulement to be granted may vary depending on the intensity of calamity and the extent of crop loss and distress caused to the farmers. Amounts not collected during the year of occurrence of the calamity should be converted into term loans for a period upto 3 years and for small and marginal farmers upto 5 years in the normal circumstances. However, where the damage to crops arising out of the calamity is very severe and has caused acute distress to the farmers or if the calamity is for two successive years, banks may, at their discretion and in consultation with Task Force/Steering Committee of SLBC, grant extensions of the converted loans for longer periods ranging upto 5 to 7 years. In extreme cases of hardships arising out of the very severe loss to the crops or occurrence of three successive crop failures and the debt burden being found to be beyond the immediate repaying capacity of the borrower, conversion for longer period upto a maximum period of 9 years may also be considered by banks, in consultation with the Task Force/SLBC.
iii) Pending conversion of short-term loans, banks may grant fresh crop loans to the affected farmers.
iv) Conversion of short-term production loans may be taken up by banks at the time of sanction of fresh crop loans to the affected farmers without waiting for the due dates which are taken into account in normal course of sanction of such loans.
v) Similarly, installments of principal/interest in respect of term loans may be rescheduled for a period of 3 years which could be extended for longer period in the circumstances mentioned at [ii] above.
vi) Where relief in the form of conversion/reschedulement of loans is extended to the farmers, such converted/rescheduled dues should be treated as current dues and banks should not compound interest in respect of the loans so converted/rescheduled.
vii) Banks may not levy any interest and consider waiving penal interest, if any, already charged in regard to the loans converted/rescheduled.
Other guidelines contained in our circular in this regard as referred to herein above shall remain unchanged.
3. In order to avoid delay in taking relief measures on the occurrence of natural calamity, you may evolve a suitable policy framework in this regard with the approval of the Board of Directors and forward a copy of the policy note for our record. It is advisable to provide an element of flexibility in the measures so as to synchronise the same with the measures which could be appropriate in a given situation in a particular State or District and parameters in this regard may be decided in consultation with SLB/DCC, as the case may be.
4. We presume that in pursuance of earlier guidelines, all the banks must have already evolved proper form of documentation in consultation with their legal department taking into account the relevant provisions of the Contract Act and the Limitation Act. However, we suggest that by way of precaution, you may get the documentations settled as per revised guidelines in consultation with your legal department and may consider issuing appropriate instructions to your offices in respect of documentation in relation to cases covered by the captioned guidelines.