Page 39 - Banking Finance June 2023

ARTICLE

Department of Banking Regulation1 from time to time. without waiting for the receipt of insurance claim in cases
Further, interest income from such restructured where there is reasonable certainty of receiving the claim.
accounts classified as 'standard assets' will be
recognized as per the norms prescribed in the DBR
Providing Fresh Loans:
guidelines.
Sanctioning of Fresh Loans:
The asset classification for the remaining dues, which
Once the decision to reschedule loans is taken by SLBC/
does not form a part of the restructured portion, will
DCC, pending conversion of short-term loans, banks shall
continue to be governed by the original terms and
grant fresh crop loan to the affected farmers based on
conditions of its sanction. Consequently, the dues from
the scale of finance of the crop and the cultivation area
the borrower shall be classified by the lending bank
as per the extant guidelines.
under different asset classification categories viz.
The bank assistance in agriculture and allied activities
standard, sub-standard, doubtful and loss.
(poultry, fishery, animal husbandry, etc.) may also be
Additional finance, if any, shall be treated as "standard
needed for long term loans for a variety of purposes such
asset" and its future asset classification will be governed
as repair of existing economic asset(s) and/or acquisition
by the terms and conditions of its sanction.
of new asset(s). Similarly, rural artisans, self-employed
With the objective to ensure that banks are proactive persons, micro and small industrial units, etc. in the
in extending relief to the affected persons, the benefit areas affected by a natural calamity may require fresh
of asset classification of the restructured accounts as credit to sustain their livelihood. Banks shall assess the
on the date of natural calamity will be available only if need and decide on the quantum of loans to be granted
the restructuring is completed within a period of three to the affected borrowers taking into consideration,
months from the date of natural calamity. In the event amongst others, the credit requirement and the due
of extreme calamity, when the SLBC/DCC is of the view procedure for sanctioning fresh loans.
that this period will not be sufficient for the branches
Banks shall also grant consumption loan up to Rs.
to reschedule all the affected loans, it shall approach
10,000/- to existing borrowers without any collateral.
NABARD giving the reasons for seeking extension. These
The limit may, however, be enhanced beyond Rs.
requests will be considered on the basis of merit of each
10,000/- at the bank's discretion.
case.
The accounts that are restructured for the second time Terms and Conditions:
or more on account of recurrence of natural calamities
Guarantee, Security and Margin:
shall retain the same asset classification category on
Credit shall not be denied for want of a personal
restructuring. Accordingly, for a restructured standard
guarantee alone. Where the bank's existing security has
asset, the subsequent restructuring necessitated on
been eroded because of damage or destruction by
account of natural calamity shall not be treated as
floods, assistance will not be denied merely for want of
second restructuring, i.e., the standard asset
additional fresh security. The fresh loan shall be granted
classification shall be maintained. However, all other
even if the value of security (existing as well as the asset
restructuring norms shall apply.
to be acquired from the new loan) is less than the loan
Utilization of Insurance Proceeds: amount. For fresh loans, banks shall take a sympathetic
view.
While restructuring the loans in areas affected by a natural
calamity, banks shall also take into account the insurance Where the crop loan (which has been converted into
proceeds, if any, receivable from the Insurance Company. term loan) was earlier sanctioned against personal
The insurance proceeds shall be adjusted to the security/hypothecation of crop and the borrower is not
'restructured accounts' in cases where fresh loan have been able to offer charge/mortgage of land as security for
granted to the borrower. However, banks shall act with the converted loan, she/he shall not be denied
empathy and consider restructuring and granting fresh loans conversion facility merely on the ground of his/her

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