June 8, 2002

DBOD.No.Dir.BC 114/13.03.00/2001-02

All Scheduled Commercial banks
(excluding RRBs and LABs)

Dear Sir,

Charging of interest at monthly rests

Please refer to our circular DBOD.No.Dir.BC.73/13.03.00/2001-02 dated March 9, 2002 as well as our subsequent circular DBOD.No.Dir.BC.107/13.03.00/2001-02 dated May 28, 2002 on the subject.

2. We advise that in terms of item (i) of our Directive DBOD.No.Dir.BC.72/13.03.00/ 2001-02 dated March 9, 2002, the existing practice of charging/ compounding of interest on agricultural advances would be linked to crop seasons and the instructions regarding charging of interest on monthly rests shall not be applicable to agricultural advances. Since some doubts have arisen with regard to applicability of the above instructions to short duration crops and allied agricultural activities, the banks are advised to follow the instructions contained in circular RPCD.No.PLFS.BC.129/05.02.27/97-98 dated June 29, 1998 issued by our Rural Planning and Credit Department. As indicated therein, the banks may take into consideration due dates fixed on the basis of fluidity with borrowers and harvesting / marketing season while charging interest and compound the same if the loan / instalment becomes overdue in respect of short duration crops and allied agricultural activities.

3. Please acknowledge receipt.

Yours faithfully,

( B. Mahapatra )
General Manager