MC of RBI dt.

01-07-2013 says
4.2.13 Agricultural advances
i. A loan granted for short duration crops ill !e treated as "#A$ if the instal%ent
of principal or interest thereon re%ains o&erdue for to crop seasons. A loan
granted for long duration crops ill !e treated as "#A$ if the instal%ent of
principal or interest thereon re%ains o&erdue for one crop season. 'or the
purpose of these guidelines$ (long duration) crops ould !e crops ith crop
season longer than one year and crops$ hich are not (long duration) crops$
ould !e treated as (short duration) crops. *he crop season for each crop$ hich
%eans the period up to har&esting of the crops raised$ ould !e as deter%ined
!y the +tate ,e&el Ban-ers. Co%%ittee in each +tate. /epending upon the
duration of crops raised !y an agriculturist$ the a!o&e "#A nor%s ould also !e
%ade applica!le to agricultural ter% loans a&ailed of !y hi%.
*he a!o&e nor%s should !e %ade applica!le to all direct agricultural ad&ances.
And direct ad&ance list includes 0CC.
In a!o&e para phrase used 1instal%ent of principal or interest thereon1
In a 0CC there %ay !e li%it of 2 types 2as per RBI circular dated 11-03-
20124
3.1.1. *he short term limit to !e arri&ed for the first year5 'or far%ers raising
single crop in a year5 +cale of finance for the crop 2as decided !y /istrict ,e&el
*echnical Co%%ittee4 6 76tent of area culti&ated 8 109 of li%it toards post-
har&est : household : consu%ption re;uire%ents 8 209 of li%it toards repairs
and %aintenance e6penses of far% assets 8 crop insurance$ #AI+ < asset
insurance.
3.1.=. Term loans for investments toards land de&elop%ent$ %inor irrigation$
purchase of far% e;uip%ents and allied agricultural acti&ities. *he !an-s %ay fi6
the ;uantu% of credit for ter% and or-ing capital li%it for agricultural and allied
acti&ities$ etc.$ !ased on the unit cost of the asset:s proposed to !e ac;uired !y
the far%er$ the allied acti&ities already !eing underta-en on the far%$ the !an-.s
>udg%ent on repay%ent capacity &is-a-&is total loan !urden de&ol&ing on the
far%er$ including e6isting loan o!ligations.
and para 3.1.7 +tates
5.1.7. Fixation of Sublimits for other than !arginal Farmers"
i. +hort ter% loans and ter% loans are go&erned !y different interest rates.
Besides$ at present$ short ter% crop loans are co&ered under Interest +u!&ention
+che%e: #ro%pt Repay%ent Incenti&e sche%e. 'urther$ repay%ent schedule
and nor%s are different for short ter% and ter% loans. ?ence$ in order to ha&e
operational and accounting con&enience$ the card li%it is to !e !ifurcated into
separate su! li%its for short ter% cash credit li%it cu% sa&ings account and ter%
loans.
ii. #ra$ing limit for short term cash credit should !e fi6ed !ased on the
cropping pattern and the a%ounts for crop production$ repairs and %aintenance
of far% assets and consu%ption %ay !e alloed to !e dran as per the
con&enience of the far%er. In case the re&ision of scale of finance for any year !y
the district le&el co%%ittee e6ceeds the notional hi-e of 109 conte%plated hile
fi6ing the fi&e year li%it$ a re&ised draa!le li%it %ay !e fi6ed and the far%er !e
ad&ised a!out the sa%e. In case such re&isions re;uire the card li%it itself to !e
enhanced 2=th or 3th year4$ the sa%e %ay !e done and the far%er !e so
ad&ised. For term loans% installments %ay !e alloed to !e ithdran !ased
on the nature of in&est%ent and repay%ent schedule dran as per the econo%ic
life of the proposed in&est%ents. It is to !e ensured that at any point of ti%e the
total lia!ility should !e ithin the draing li%it of the concerned year.
7.As the && limit and the term loan limit are t$o distinct com'onents of the
aggregate card limit !earing different rates of interest and repay%ent periods$
until a co%posite card could !e issued ith appropriate softare to separately
account transactions in either su! li%its$ to separate electronic cards %ay !e
issued.
#ara =.2.13 see%s to !e dealing ith (term loan limit( as it is
saying )nstallment of 'rinci'al or interest thereon% and not for short
term limit hich is in the nature of CC li%it$ for this RBI circular 11-03-
2012 says
14. &lassification of account as *+A"
1=.1. @ith a &ie to si%plifying asset-classification$ the Co%%ittee has
reco%%ended that an account could !e treated as (standard)$ hen the !alance
outstanding is less than or e;ual to draing li%it ,short term -cro'. loan/ at any
point of ti%e during the preceding one year. In other ords$ it is suggested that
the short term loan -$ith ma0or com'onent of cro' loan. sanctioned on the
0CC can !e gi&en the same treatment as a 1cash credit2 account for the
'ur'ose of a''l3ing 'rudential norms and should not !e treated as (out of
order) if the !alance outstanding is less than or e;ual to the draing li%it and
each dral is repaid ithin a period of 12 %onths. Term loan under 4&& has
fi6ed repay%ent schedule and is to !e go&erned !y e6tant prudential nor%s.
*he a!o&e para stand re&ised !y RBI !y circular dated 07-0A-2012 as
under
14. &lassification of account as *+A"
1=.1 *he extant 'rudential norms for inco%e recognition$ asset-classification
and pro&isioning ill continue to apply for loans granted under re&ised 0CC
+che%e.
Conclusion5
In %y opinion$ .e.f. 07-0A-2012$ (76tant #rudential "or%s) of IRAC
(Continue to Apply) infers that (+hort *er% Crop ,oan) under 0CC ill
!e go&erned !y IRAC nor%s as applica!le to nor%al CC account and
(*er% ,oan) under 0CC ill !e go&erned !y IRAC nor%s gi&en in para
=.2.13 of MC.
5'inion of others members are $elcome