What changed
RBI provided specific prudential norms for StCBs and DCCBs implementing the Agricultural Debt Waiver and Debt Relief Scheme, 2008. Banks must transfer eligible waiver amounts to a separate 'Amount receivable from Government' account and treat it as performing, subject to present value loss provisioning. The discount rate is set at 9.56% based on the 364-day T-bill yield.
What it means for you
Co-operative banks can now classify waived loan amounts as performing assets, improving their asset quality on paper, but must provision for the time value of money. The phased reversal of excess prudential provisions allows banks to smooth earnings over two years, contingent on government receipts. This aligns regulatory treatment with the government's fiscal support to farmers.
What you must do
- Transfer eligible waiver amounts for small/marginal farmers to 'Amount receivable from Government of India under Agricultural Debt Waiver Scheme 2008' account.
- Compute present value loss using 9.56% discount rate and make adequate provision, offsetting existing NPA provisions.
- Reverse excess provisions in 69:31 ratio for FY2009 and FY2010 only after receiving respective government installments.
- Reclassify accounts as NPAs with original NPA date if a farmer's claim is rejected, and adjust provisions accordingly.
Who it affects
State Co-operative Banks (StCBs), District Central Co-operative Banks (DCCBs), Farmers eligible under the Agricultural Debt Waiver and Debt Relief Scheme, 2008
How should banks treat the waived amount for small/marginal farmers?
Transfer the eligible waiver amount to a separate 'Amount receivable from Government' account, treat it as a performing asset, and provide for present value loss using a 9.56% discount rate.
What happens if a farmer's claim is rejected after being treated as performing?
The account must be reclassified as NPA based on its original NPA date, and the PV provision can be set off against the required NPA provision.
Can banks reverse excess prudential provisions immediately?
No, reversal must be phased: 69% in FY2009 and 31% in FY2010, only after receiving the corresponding government installments.