RBI excludes farm loans from resolution framework

Farm credit exposures of all lending institutions, including NBFCs, are excluded from the scope of the resolution framework

Image source: Shutterstock

Image source: Shutterstock

Reserve Bank of India has recently released a set of frequently asked questions (FAQ) on the one-time loan restructuring scheme announced on August 6. The RBI clarified that the farm credit exposures of all lending institutions, including NBFCs, are excluded from the scope of the resolution framework. However, the loans to allied activities, such as dairy, fishery, animal husbandry, poultry, bee-keeping, and sericulture would be eligible for the resolution scheme.

FAQs on the resolution framework for Covid-19 related stress, released by RBI:

"Are all the farm credit as listed in Paragraph 6.1 of Master Direction FIDD.CO.PLan 1/04.09.01/2016-17 dated July 7, 2016 (as updated) ineligible under the Resolution Framework? Are the JLG loans provided to farmer households by MFIs are eligible for resolution plan under the Resolution Framework?

All the farm credit exposures of all lending institutions, including NBFCs, of the nature listed in Paragraph 6.1 of Master Direction FIDD.CO.PLan 1/04.09.01/2016-17 dated July 7, 2016 (as updated), except for loans to allied activities, viz., dairy, fishery, animal husbandry, poultry, bee-keeping and sericulture are excluded from the scope of the Resolution Framework. Subject to the above, loans given to farmer households would be eligible for resolution under the Resolution Framework if they do not meet any other conditions for exclusions listed in the Resolution Framework."

The loan restructuring scheme announced by the RBI is aimed at giving some relief to the borrowers after the end of the moratorium. It is also expected to provide some relief to the rising NPAs in India’s banking industry.

 

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