NPA Guidelines For Agri-finance Eased

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Mumbai, May 18: In order to enhance the flow of credit to the priority sector, the Reserve Bank of India (RBI) has asked all scheduled commercial banks to prioritise lending to agriculture at a lower credit cost.

“Banks should also expand their reach in rural areas,” said RBI governor, YV Reddy.

The RBI has eased the non-performing assets (NPA) norms for agricultural finances. “A loan granted for short duration crops will be treated as an NPA if the installment of the principal or interest thereon remains unpaid for two crop seasons beyond the due date,” the RBI said. In cases of long duration crops, a loan will be treated as an NPA if the installment of the principal or interest remains unpaid for one crop season beyond the due date.

The RBI also proposed that investment by banks in securitised assets representing direct (indirect) lending to agriculture be treated as lending under priority sector, provided the securitised loans are originated by banks and financial institutions. In a further effort to liberalise agricultural loans, Dr Reddy proposed that banks may waive margin and security requirements for agricultural loans upto Rs 50,000, and in the case of agri-business and agri-clinics for loans upto Rs 5 lakh.

“This will ensure flow of credit to the smaller borrowers who do not have the necessary assets as collateral,” said Dr Reddy.

Also, loans to build storage facilities like warehouse, market yards, godowns, silos and cold storages designed to store agricultural produce and products will come under indirect agricultural finance.