RBI lets banks extend crop loan recovery to 5 years during calamities

Reserve Bank of India (RBI) has relaxed guidelines for banks on recovery of crop loans extended to farmers in cases crop losses due to natural calamities like floods or droughts.

RBI has allowed banks to extend recovery period of loans for up to 5 years in cases of crop losses of 50 per cent or more.

Under the guidelines on relief for natural calamities, RBI said, State Level Bankers' Committees / District Level Consultative Committees / banks will be allowed to take a view on rescheduling of loans if the crop loss is 33 per cent or more.

However, if crop damage is 50 per cent, the loan repayment period can be extended up to 5 years, including one year of moratorium.

''Banks may allow a maximum period of repayment of up to 2 years (including the moratorium period of 1 year) if the loss is between 33 per cent and 50 per cent. If the crop loss is 50 per cent or more, the restructured period for repayment may be extended to a maximum of 5 years (including the moratorium period of one year),'' RBI said.

In all cases of restructuring, the central bank said, the moratorium period of at least one year should be considered. Moreover, the banks should not insist on additional collateral security for such restructured loans, it added. 

The notification follows the government's decision in April to reduce the criteria of crop loss from 50 per cent to 33 per cent for providing input subsidy (compensation) to farmers.