RPCD.No.PS.BC.6/PS.126-84
August 2, 1984
The Chairman/Managing Director
All Banks (Public
& Private Sector)
Dear Sir,
Revised Guidelines for Relief Measures
by Banks in Areas Affected by Natural
Calamities
Please refer to the Standing Guidelines
regarding measures to be taken by banks to provide relief and rehabilitation
assistance to people in areas affected by natural calamities evolved by the
Government of India vide their letter F.No.24(20)/79-ESA dated 6 October 1979
addressed to banks in the Public Sector and a copy thereof forwarded to banks
in the private sector under cover of our circular DBOD.No.BP.BC.180/C453(G)-79
dated 18 December 1979.
2. We advise that with a view
to suggesting improvement in the Standing Guidelines, two Study Groups-one for
short term loans and another for term-loans were constituted by the Committee
on Agricultural Lending by Commercial Banks (CALCOB) in 1980. The above guidelines
have been revised after considering the views of CALCOB on the reports submitted
by the two Study Groups which have been approved by the Ministry of Finance
Banking Division, Government of India. A copy of the revised guidelines is attached herewith.
3. Banks are advised to follow
the revised guidelines in providing relief and rehabilitation assistance to the
people affected by natural calamities such as floods, droughts, cyclones, etc.
and issue suitable instructions to their offices/ branches to ensure effective
implementation of the guidelines at field level.
4. Kindly acknowledge
receipt.
Yours faithfully,
Sd/-
(Kum.D.R. Hiranandani)
Joint Chief Officer
Guidelines for
relief measures by banks in areas affected by natural
Calamities
Periodical but frequent occurrence of
droughts, floods, cyclones, tidal waves and other natural calamities cause heavy
toll of human life and wide spread damage to economic pursuits of human beings
in one area or the other of our country. The devastation caused by such natural
calamities call for massive rehabilitation efforts by all agencies. The State
and local authorities draw programmes for economic rehabilitation of the
affected people. The developmental role assigned to the commercial banks and
co-operative banks, warrants their active support 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 the utmost speed and
without any loss of lime. This presupposes that all the branches of commercial
banks and their Regional and Zonal Offices will have a set of standing
instruction, spelling out the action that the branches will have to initiate in
the calamity affected areas immediately after the requisite declaration by the
district/State authorities. It is necessary that these instructions should also
be available with the State Government authorities and all the District
Collectors so that all concerned are clear as to the action that would be taken
by the banks' branches in the affected areas.
3. The precise details in
regard to the provision of credit assistance by the commercial banks will depend
on the requirements of the situation, their own operational capabilities and the
actual needs of the borrowers. This can be decided by them in consultation with
the district authorities.
4. Nevertheless, to enable
banks to take uniform and concerted action expeditiously, particularly to
provide the financial assistance to agriculturist, small scale industrial units,
artisans, small business and trading establishments affected by natural
calamities, the following guidelines are commended,
5. To facilitate co-ordination
and expeditious action by the financing institutions, the convenors of the
concerned district consultative committees of the affected districts should
convene a meeting immediately after the occurrence of natural calamities. In the
event of the covering a larger part of the State, the convenors of the State
Level Bankers' Committee 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 calamities the banks
may take into consideration the assistance/subsidy received by him from the
State Government and/or other agencies.
6. Divisional/Zonal Managers of
commercial banks should he vested with certain discretionary powers so that they
do not have to seek fresh approvals from their Central Offices to the line of
action agreed to by the District/State Level Bankers' Committees. For example
such discretionary powers would be necessary in respect of adoption of scale of
finance, extension of loan periods, sanction of new loans keeping in view the
total liability of the borrower (i.e. arising out of the old loan where the
assets financed are damaged or lost on account of natural calamity as well as
the new loan for creation/repair of such assets, margin, security,
etc.).
Identification of the
beneficiaries:
7. The bank branches should
obtain from the concerned Govt. authorities list of affected villages within
their areas of operation. From among the identified persons, assessment of loss
sustained by the existing constituents of the banks would be easier. In the case
of fresh borrowers, however discreet enquiries should be made in this regard and
assistance of the Govt. authorities should be sought wherever available for
ascertaining genuineness of their requirements. For providing conversion
facilities in respect of crop loans, procedure for identification of areas where
such facilities have to be provided has been indicated under crop loans in
paragraph 12 below.
Coverage:
8. Each branch will provide
credit assistance not only to its existing borrowers but also to other eligible
persons within its command area provided they are not covered by any other
financial agency.
9. Credit requirements of the
borrowing members of the co-operatives will be met by the Primary Agricultural
Co-operative Societies (PACs)/LAMPS/FSS etc. Branches of commercial banks may,
however, finance the non-borrowing members of the cooperative societies for
which the latter will issue the usual 'No objection' certificates
speedily.
Priorities:
10. Immediate assistance
including finances would be needed for protecting and rejuvenating standing
crops/orchards/plantations etc. Equally important will be repair and protection
of livestock 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 would
be taken up.
Agricultural loans:
11. The bank, assistance in
relation to agriculture would be needed in the form of short-term loans for the
purpose of raising crops and term loans for purchase of milch/draught animals,
repairs of existing tubewells and pumpsets, digging of new tubewells and
installation of new pumpsets, land reclamation, silt/sand removal, protection
and rejuvenation of standing crops/ orchard/plantations, etc. repairs and
protection of livestock sheds, grain and fodder storage structures,
etc.
Crop Loans:
12. In the case of natural
calamities, such as droughts, floods etc., Government authorities would have
declared annewari to indicate the extent to which the crops are damaged.
However, where such declaration has not been made banks should not delay in
providing conversion facilities and the District Collector's certificate that
crop yield is below 50%. The normal yield supported by the views of the DCC in
the matter for which a special meeting may have to be convened, should be
sufficient for invoking quick relief arrangements. The certificate of the
Collector should be Issued crop-wise covering all crops, including food-grains.
Issuing of such certificates in respect of cash crops, may however, be left to
the discretion of the Collector.
13. Guidelines for providing
conversion facilities The following guidelines are suggested for providing
conversion facilities,
a) Short-term production loans may be converted into
term loans on the due date of repayment.
b) The repayment period of the converted term loans may
be fixed having regard to the overall repaying capacity of the borrower taking
into account his various commitment on account of rephasement/rescheduling of
earlier term loan, repayment schedule for new term loan, if any, repayment
date/s of fresh crop loan for the current ensuing season and the indemnity if
any, available to borrowers from the GICI. Depending upon the intensity of crop
loss/calamity and the repaying capacity of the borrower the converted short term
loan may be fixed for a period upto 3 years and in exceptional cases,
particularly for small and marginal farmers the period may be extended upto 5
years. If there are two successive natural calamities eroding the repaying
capacity of the borrower, banks can grant extensions of the converted loans upto
a maximum period of 5 years and in exceptional cases for small and marginal
farmers or in cases of 3 successive crop failures, for other farmers also upto a
maximum period of 7 years taking into account the viability of their operations.
In case however, the debt burden is still beyond the repaying capacity of the
borrower, conversion for longer periods upto 10 years may also be considered
especially in cases when Govt. assistance for the purpose, as in the case of
co-operatives, is not available.
As far as
possible, it would be preferable to prescribe common due dates for payment of
instalments of the converted loan and extended term loans.
c) All short-term loans, except those which are overdue
at the time of occurrence of natural calamity, should be eligible for conversion
facilities.
d) Only principal amount of the short term loan should
be converted into term loan. In the case of small and marginal farmers, interest
on short term loan which has been converted may be postponed and recovered in
full at the time of the next harvesting/season. There should be no compounding
of the interest outstanding on the short term loan in such cases.
For oilier
farmers who have an established capacity to pay the interest due on short term
loans, recovery of such interest may be made a pre-condition for the grant of
conversion facilities.
e) The rates of interest on the converted loans should
be the same as that charged on short-term loans.
f) Pending finalisation of conversion/rescheduling
operations which might take time, the eligible cultivators will be disbursed
crop loans for the current as also ensuing seasonal operations.
14. To be effective, the
assistance to farmers will have to be disbursed with utmost speed. For this
purpose the lead bank and the district authorities concerned should evolve a
procedure whereby identification of borrowers, issuance of certificates
regarding Government/co-operative bank dues, title of the applicant to land etc.
is secured simultaneously.
Possibilities
of organising credit camps where Block Development and Revenue officials.
Co-operative Inspectors, Panchayat Pradhans etc. could help finalise the
applications on the spot could be explored in consultation with the district
authorities where such credit camps are being organised. The State Government
will also arrange with the Collectors to issue an executive order for the
following officers or their authorised representatives to assume respective
duties and responsibilities as envisaged under implementation of credit camps
programme:
1. Block
Development Officer
2. Co-operative
Inspector
3. Revenue Authority/Village Revenue
Assistant
4. Bank official operating in the
area
5. PACS/LAMPS/FSS
6. Gram
Panchayat Pradhan
In order to
avoid delay, the forms in which the State Government Officers have to give
certificates at the Credit Camps may be got printed in sufficient numbers by the
respective District Magistrates.
15. In considering loan
applications for the ensuing crop season the current dues of the applicants to
the State Government may be ignored, provided the State Government declare a
moratorium for a sufficiently long period on all amounts due to the government
as on the date of occurrence of the natural calamity.
Scale of Finance:
16. Scale of finance in respect
of different crops will be uniform in a district. The scale, will be fixed
taking into account the prevailing conditions and norms presently adopted by
different lending agencies. In fixing the scales, minimum consumption needs of
borrowers, will be taken into account. The concerned District Magistrate and
Managers of branches of banks operating in the district would be advised to
adopt the scales so laid down.
Development Loans - Investment
Costs:
17. The existing term loan
instalments will have to be rescheduled/postponed keeping in view the repaying
capacity of the borrowers and the nature of natural calamity viz..
i) Droughts, floods or cyclones etc. where only crop
for that year is damaged and productive assets are not damaged.
ii) Flood or cyclones where the productive assets are
partially or totally damaged and borrowers are in need of a new loan.
In regard to
natural calamity under category (i) the banks may postpone the payment of
instalment during the year of natural calamity and extend the loan period by one
year except those (subject to the following exceptions).
a) Those cultivators who had not effected the
development or investment for which the loan was obtained or had disposed of the
equipments or machinery purchased out of the loan.
b) Those who are income tax payers.
c) In the case of drought those who are having
perennial sources of irrigation except where water supply was not released from
canals or irrigation facility was not available from other perennial
sources.
d) Tractor owners except in genuine cases where there
is loss of income and consequential impairment of their repaying
capacity.
Under this
arrangement the instalments defaulted willfully in earlier years will not be
eligible for rescheduling. The banks may have to postpone payment of interest by
borrowers. While fixing extension of period the commitment towards interest may
also be taken into account.
In regard to
category (ii) i.e. where the borrower's assets are totally damaged, the
rescheduling by way of extension of loan period may be determined on the basis
of overall repaying capacity of the borrower including his repayment commitment
on the old term loans and towards the conversion loan (medium term loan) on
account of postponing of repayment of short-term loans and the fresh crop loan.
In such cases, the repayment period of total loan (including interest liability)
less the subsidies received from the Government agencies, compensation available
under the insurance schemes, etc. may be fixed having regard to the repaying
capacity of the borrower subject to a maximum of 15 years, depending upon the
type of investment as well as the economic (useful) life of the new asset
financed, except in cases where loan relate to land shaping, sill removal, soil
conservation etc. Thus in the case of loans for agricultural machineries. viz.
pumpsets and tractors, it should be ensured that the total loan period does not
generally exceed 9 years from the date of advance.
18. Apart from rescheduling
existing term loans, banks will provide to affected farmers diverse type of term
loans for developmental purposes, such as:
a) Minor irrigation: Term loans for repairs to wells,
pumpsets, etc. which has to be quantified after assessing the extent of damage
and estimated cost of repairs.
b) Bullocks: Where the draught animals have been washed
away. requests for fresh loans for a new pair of bullocks/he-buffaloes may be
considered. Where loans are given for purchase of new cattle or where farmers
have bought milch cattle reasonable credit may be given for purchase of fodder
or feed.
c) Milch Cattle: Term loan for milch cattle will be
considered depending upon breed, milk yield, etc. the loan amount will include
repairs to shelters, purchase of equipment and feed.
d) Insurance : Considering the proneness of areas to
cyclones and other natural calamities, the cattle should he insured instead of
Risk-cum-Mortality Fund established for similar purpose in other safe area.
Milch animals/draught cattle should be branded for identification as also to
serve as safeguard against their re-sale by the beneficiaries.
e) Poultry and Piggery: For poultry, piggery and
goatery, loans will be considered as per norms of different banks .
f) Fisheries: In the case of borrowers who have lost
their boats, nets and other equipments, rephrasing of payment of existing dues
may be allowed on merits. Fresh loans may be granted to them with loan maturity
of 3/4 years. Loans for repairs to boats of the existing borrowers may also be
considered. In cases where subsidy is available, the quantum of loan should be
reduced to that extent. In States where substantial subsidy towards the cost of
boats, nets, etc. is likely to be available, proper co-ordination with the
concerned State Government Department in this regard must be ensured. Apart from
complying with other norms and conditions for grant of advances, assistance may
be sought from the Department of Fisheries, which may be expected to take
measure which would enable banks to proceed with financing for this purpose. The
boats should be comprehensively insured against all risks including natural
calamities as far as possible.
Land Reclamation:
19. It is likely that
financial assistance will be required for reclamation of lands covered by sand
casting. Normally, sand/silt deposits upto 3 inches will either be ploughed back
into soil or removed by the farmers without any need for financial assistance.
Loan applications will, however, be considered in cases where immediate
cultivation is possible and reclamation (removal of sand) is necessary. Wherever
reclamation finance for saline lands is warranted , the cost of reclamation not
exceeding 25% of the scale allowed for crop loan may be advanced along with the
crop loan.
20. For other activities like
Sericulture, Horticulture, Floriculture, Betelvine growing etc., banks will
advance loans for investment and working capital under their existing schemes
and follow usual procedures laid down by them. The working capital finance may
be provided until such period the income from the plantation is adequate to take
care of such expenditure.
21. However, additional need
based crop loans, if necessary, would be given for revitalisation/ rejuvenation
of standing crop/orchards based on individual assessment.
22. The question relating to
procurement and proper arrangement for supply of adequate quantity of seeds and
various types of fertilisers will have to be discussed with the State Government
and District Administration in each district. Similarly, for the purpose of
ensuring adequate irrigation facilities, the State Government will undertake
repair, to Government owned shallow and deep tubewells and River Lift Irrigation
System damaged by floods and other natural calamities. As for fisheries, the
fisheries department of the Stale Government will make arrangement to obtain
fingerlings/and supply them to those who wish to revive tank fishing with bank
finance,
23. The State Government will
have to consider preparation of schemes which would enable commercial banks to
obtain refinance at NABARD rates for amounts advanced by banks for the said
purpose.
Consumption Loans:
24. In view of the
damage to crops and property, existing borrowers need consumption loan for
sustenance till the flow of Income is resumed. For this purpose, Rs. 75/- is
admissible for 'general consumption'. In view of the special situation obtaining
in the affected area and the need for consumption loan for general purposes, the
banks may extend for 'general consumption' loan upto Rs. 250/- to be released in
suitable instalments over the period upto the harvesting of the current or the
next crop depending on the devastation caused by the natural calamity or proper
assessment in individual cases.
Artisans and
Self-employed:
25. For all categories of rural
artisans and self employed persons including handloom weavers, loans will be
needed for repairs of sheds, replacement of implements and purchase of raw
materials and stores. In sanctioning the loan, due allowance will be made for
subsidy/assistance available from the concerned State Government.
26. There may lie many artisans
traders and self-employed who may not have any banking arrangement or facility
with any bank, but will now need financial assistance for rehabilitation. Such
categories will be eligible for assistance from banks' branches in whose command
areas they reside or carry on their profession/business. Where such a
person/party falls under the command area of more than one bank, the banks
concerned will meet together and sort out his problem.
Small scale and Tiny
Units:
27. Rehabilitation of units
under village and cottage industry sector, small scale industrial units as also
smaller of the medium industrial sector damaged, will also need attention. Term
loans for repairs to and renovation of factory buildings/sheds and machinery as
also for replacement of damaged pans and working capital for purchase of raw
materials and stores will need to be provided urgently.
28. Where the raw materials or
finished goods have been washed away or ruined or damaged, banks' security for
working capital will naturally be eroded and the working capital account (Cash
Credit or loan) 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.
29. Depending on the damage
suffered and time needed for rehabilitation and restarting production and sales,
term loan instalments will have to be suitably rescheduled keeping in view the
income generating capacity of the unit. Short-fall 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 Government or any
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
banks in extending credit to a small/tiny unit for its rehabilitation should be
the viability of the venture after the rehabilitation programme is
implemented.
30. Special Refinance Facility
(SRF) 1979* introduced by IDBI for providing full
refinance to banks on soft terms will be availed of during the period of its
validity. In this connection reference may be made to their circular letter
No-7479/RD.Pro(14)/78-79 of 24th May, 1979.
* This facility was
discontinued vide RPCD.No.CPFS.BC.62/PS.126-84/85
dt 24.06..1985
Terms and Conditions:
31. The terms and conditions
governing relief loans will be flexible as to security, margin, etc. In the case
of small loans covered by guarantee of Deposit Insurance and Credit Guarantee
Corporation, personal guarantees will not be insisted upon. In any case, credit
should not be denied for want of personal guarantees.
Security:
32. Where the bank's existing
security has been eroded because of damage or destruction by floods assistance
will not be denied merely for want of additional fresh security. The fresh loan
may be granted even if the value of security (existing as well as the asset to
be acquired from the new loan) is less than the loan amount. For fresh loans
sympathetic view will have to be taken.
a) Where the crop loan (which has been converted into
term loan) was earlier given against personal security/hypothecation of crop
which would be the case for crop loans upto Rs.5.000/- and the borrower is not
able to offer charge/mortgage of land as security for the converted loan, he
should not be denied conversion facility merely on the ground of his inability
to furnish land as security.
If the
borrower has already taken a term loan against mortgage/charge on land, the bank
should be content with a second charge for the converted term loan.
Banks should
not insist on third party guarantees for providing conversion
facilities.
b) In the case of term loans for replacement of
equipments, repairs, etc. and for working capital finance to artisans and
self-employed persons or for crop loans, usual security may be obtained. 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 i.e. in the form of deeds,
as also the registration certificates issued to registered
share-croppers.
c) As per the recommendations of the R.B.I. Report on
customer service, banks will finance the borrowers who require loans upto
Rs.500/- without insisting either on collateral security or guarantee for any
type of economic activity.
Margin:
33. Margin requirements be
waived or the grants/subsidy given by the concerned State Government may be
considered as margin.
Interest:
34. The rates of interest will
be in accordance with the directives of the Reserve Bank. Within the areas of
their discretion, however, banks are expected to take a sympathetic view of the
difficulties of the borrowers and extend a concessional treatment to calamity
affected people.
Those meeting
the eligibility criteria under the Scheme of Differential Rate of Interest
should he provided credit in accordance with the provision of the
Scheme.
In respect of
current dues in default, no penal interest will be charged. The banks should
also suitably defer the compounding of interest charges.
Applicability of the guidelines in
the case of riots and disturbances:
35. Whenever RBI advises
the banks to extend rehabilitation assistance to the riot/disturbance affected
persons, the aforesaid guidelines may broadly be followed by links for the
purpose. It should, however, be ensured that only genuine persons, duly
identified by the State Government agencies as having been affected, by the
riots, etc., are extended rehabilitation assistance.
Refer
RPCD.No.PLFS.BC./2/05.04.02
/2002-2003 dt 03-08-02
RPCD.No.PLFS.BC.128/05.04.02\97-98 dt
20-06-98
RPCD.No.PLFS.BC.59/05.04.02/92-93 dt 06-01-93
RPCD.No.PLFS.BC.38/PS.126-91/92 dt 21-09-91
RPCD.No.PLFS.BC.28/PS.126-86 dt 05-12-86
RPCD.No.CPFS.BC.62/PS.126/84/85 dt 24-06-85