DBOD.No. BP.BC.120/21.04.048/98

December 29, 1998
Paush 1920 (Saka)

All Commercial Banks

Excluding RRBs)

Dear Sirs,

PRUDENTIAL NORMS ON INCOME RECOGNITION, ASSET CLASSIFICATION AND PROVISIONING- AGRICULTURAL LOANS AFFECTEDBY NATURAL CALAMITIES

In terms of the instructions issued by RPCD (c.f. Circular RPCD. No. PLFS.BC.128/05.04.02/97-98 dated July 21, 1998), where natural calamities impair the repaying capacity of agricultural borrowers, banks have been permitted to decide on their own as a relief measure, (a) conversion of the short-term production loan into a term loan or re-schedulement of the repayment period and (b) the sanctioning of fresh short-term loan, subject to the various guidelines indicated in para 2(v) of the above mentioned circular dated June 20, 1998. We advise that in such cases of conversion or re-schedulement, the term loan as well as fresh short-term loan may be treasted as current dues and need not be classified as NPA. The asset classification of these loans would thereafter be governed by the revised terms and conditions ans would be treated as NPA if interest and/or instalment of principal remains unpaid, after it has become past due, for two harvest seasons but for a period not excedding two half years as indicated in our Circular DBOD.No.BP.BC.17/21.04.048-98 dated March 4, 1998.

Please acknowledge receipt.

Yours faithfully,

(C.R. Muralidharan)

General Mangar