Page 39 - Banking Finance June 2023
P. 39

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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