What changed
The Government extended the OTS payment deadline for 'other farmers' from June 30, 2009 to December 31, 2009. Banks are now allowed to accept less than 75% of the eligible amount under OTS, provided they bear the difference themselves and do not claim it from the Government or farmer. Interest on eligible amount can be charged from July 1, 2009 onwards, but not for the period from February 29, 2008 to June 30, 2009.
What it means for you
StCBs and DCCBs can now treat accounts of 'other farmers' who have given an undertaking as standard/performing, provided they make adequate provision for loss in present value terms and the farmer pays by December 31, 2009. If payment is delayed beyond that date, the account must be classified as NPA with reference to the original NPA date, and additional provisions will be required. Banks must also open a separate account for receivables from GOI under the Debt Relief Scheme, similar to the Debt Waiver Scheme.
What you must do
- Update internal systems to reflect the new OTS deadline of December 31, 2009 for 'other farmers'.
- Ensure that if you accept less than 75% from the farmer, you bear the difference and do not claim it from the Government or farmer.
- Make adequate provisions for loss in present value terms for accounts treated as standard based on farmer undertakings.
- Open a separate account named 'Amount receivable from Government of India under Agricultural Debt Relief Scheme 2008' for eligible 'other farmers' after they pay their 75% share.
- Monitor payments closely; if a farmer fails to pay by December 31, 2009, reclassify the account as NPA with original NPA date and make additional provisions.
Who it affects
State Co-operative Banks (StCBs), District Central Co-operative Banks (DCCBs), Other farmers eligible under ADWDR 2008 Debt Relief Scheme
What is the new deadline for 'other farmers' to pay their 75% share under OTS?
The deadline has been extended from June 30, 2009 to December 31, 2009.
Can banks accept less than 75% from the farmer under OTS?
Yes, but only if the bank bears the difference and does not claim it from the Government or the farmer. The Government will still pay only 25% of the actual eligible amount.
What happens if a farmer fails to pay by December 31, 2009?
The account must be treated as NPA, with asset classification determined from the original NPA date, and additional provisions must be made as per prudential norms.