What changed
RBI provided clarifications on queries from lending institutions regarding the Agricultural Debt Waiver and Debt Relief Scheme, 2008. Key clarifications include that unapplied interest on NPA loans cannot be claimed from the government or farmer, and for investment loans, overdue interest as of December 31, 2007, unpaid by February 29, 2008, is included in eligible amount, subject to the interest not exceeding principal. Lift irrigation societies and functional societies are not covered as cooperative credit institutions, and harvesting/transport advances for sugarcane are excluded as they are not short-term production loans.
What it means for you
Banks must ensure that for NPA accounts, no interest applied after NPA classification is included in claims under the scheme, reducing potential claim amounts. For investment loans, banks need to calculate eligible amount including overdue interest up to the cut-off date, but capped at principal. Exclusions mean banks cannot claim for loans to lift irrigation societies or harvesting advances, requiring careful categorization of loan types.
What you must do
- Update internal guidelines to exclude unapplied interest on NPA loans from scheme claims.
- Recalculate eligible amounts for investment loans including overdue interest as per cut-off dates, ensuring interest does not exceed principal.
- Verify loan categories to exclude lift irrigation societies, functional societies, and harvesting/transport advances from scheme coverage.
- Communicate these clarifications to all branches for consistent implementation.
Who it affects
All Scheduled Commercial Banks, Local Area Banks, Regional Rural Banks (via NABARD), Cooperative banks (via NABARD)
Can we include unapplied interest on NPA loans in the eligible amount for debt waiver?
No, unapplied interest on NPA loans cannot be claimed from the government or the farmer. Only interest applied before NPA classification is considered.
Are loans to lift irrigation societies covered under the scheme?
No, lift irrigation societies are not cooperative credit institutions as defined, so loans to them are not eligible.
What is the eligible amount for investment loans that are irregular but not NPA?
The eligible amount includes overdue installments and the entire applicable interest overdue as of December 31, 2007, unpaid by February 29, 2008, but interest claimed cannot exceed the principal amount.