RPCD.NO.PLFS.BC./ 56 / 05.04.02(DROUGHT)/2002-2003

December 27, 2002

All Scheduled Commercial Banks
(excluding RRBs)

Dear Sir,

Relief measures by banksin areas affected by drought-One time
waiver of interest on Kharif crop loans

Please refer to our circular RPCD. NO. PLFS. BC./ 46 / 05.04.02 (DROUGHT) /2002-2003 dated November 15, 2002 regarding guidelines for relief measures by banks in the districts notified by the State Governments as drought affected.

2. Banks were advised:

1. not to recover any amount either by way of principal or interest during the current financial year in respect of Kharif crop loans,
2. to convert the principal amount of crop loan into term loan to be recovered over a period of minimum five years in the case of small and marginal farmers and four years in the case of other farmers,
3. to defer interest due in the current financial year on crop loan and not to charge interest on the deferred interest.

3. In order to further mitigate the hardship of the farmers in the drought affected States, it has been decided by the Government of India, to waive completely, the first year's deferred liability of interest on Kharif loans, as a one time measure. Such farmers who have availed of Kharif crop loans shall be entitled to obtain an endorsement of this waiver directly from the loaning bank.

4. Commercial banks are, therefore, advised to defer the interest due in the current financial year on Kharif crop loans in such a way that the first instalment of interest repayment would be 20% of the deferred interest. This instalment of deferred interest which is to be waived by banks as per Government announcement, will be reimbursed by Government of India. This would be applicable in the case of all farmers. The balance amount of the deferred interest may be recovered in reasonable instalments thereafter. It may be reiterated that no interest should be charged on the deferred interest. The modalities of reimbursement would be advised to banks in due course in consultation with the Government of India.

5. Other instructions contained in our guidelines, circulated under cover of circular RPCD. NO. PS. BC. 6 / PS.126-84 dated August 2, 1984 read with circular RPCD. NO. PLFS. BC. 128 / 05.04.02 /97-98 dated June 20, 1998, remain unchanged.

6. We shall be glad if you will please take immediate action to provide relief as above to the farmers affected by drought.

Please acknowledge receipt.

Yours faithfully,

Sd/-

(A.V.Sardesai)
Chief General Manager-in-Charge