What changed
RBI issued guidelines for banks to provide relief to poultry units affected by avian influenza outbreaks. Overdue principal and interest on working capital and term loans could be converted into term loans with repayment up to three years and an initial moratorium of up to one year. The remaining term loan portions could also be rescheduled similarly. These measures applied only to accounts classified as standard as of December 31, 2007.
What it means for you
Banks can now restructure poultry loans without treating them as non-performing assets, as converted/rescheduled loans are considered current dues. This helps lenders manage credit risk in a distressed sector while supporting borrower viability. Fresh need-based finance can be extended after conversion, potentially increasing exposure but aiding recovery. Banks must complete the reschedulement by April 30, 2008, requiring swift operational action.
What you must do
- Identify all poultry industry accounts classified as standard as of December 31, 2007, and assess their eligibility for relief.
- Convert overdue principal and interest on working capital and term loans into term loans with repayment up to 3 years and a 1-year moratorium.
- Reschedule remaining term loan portions with a similar moratorium based on cash flow projections.
- Complete all reschedulement and conversion actions on or before April 30, 2008.
- Treat rescheduled/converted loans as current dues and consider fresh need-based finance for eligible borrowers.
Who it affects
All Scheduled Commercial Banks financing poultry units, Poultry industry borrowers with standard accounts as of Dec 31, 2007, State/District Co-operative banks and RRBs (via NABARD circular)
Which accounts are eligible for these relief measures?
Only poultry industry accounts classified as standard assets as of December 31, 2007, are eligible. Overdue dues from the onset of bird flu (Dec 31, 2007) can be converted.
What is the repayment period for converted loans?
Converted loans can be repaid in installments over up to three years, with an initial moratorium of up to one year. The first repayment is due after the moratorium period.
Do these measures apply to cooperative banks and RRBs?
Yes, but NABARD will issue a separate circular on similar lines for State/District Co-operative banks and Regional Rural Banks.