Banking Regulations and Loan Extensions

Podcast Beta

Play an AI-generated podcast conversation about this lesson

Questions and Answers

When is the aggregate of debits to be transferred to a separate term loan account?

When the loan is granted for a type of activity/investment

When the loan amount is more than ₹ 1.00 lakh

When the repayment period is more than 5 years

When the proposed extension is beyond one crop season (correct)

What determines the rate of interest for crop loans?

RBI guidelines

Bank's discretion

Type of crop

DBR Master Directions on Interest Rate on Advances (correct)

What is the normal repayment period for the term loan component?

10 years

5 years (correct)

7 years

3 years

What is the security requirement for KCC limit up to ₹ 1.00 lakh?

No security requirement Signup and view all the answers

Who decides the margin for crop loans?

Banks Signup and view all the answers

What is the purpose of fixing the repayment period based on the anticipated harvesting and marketing period?

To ensure timely repayment of the loan Signup and view all the answers

Where are the security requirements for crop loans prescribed?

RBI guidelines Signup and view all the answers

Up to what amount can banks sanction loans on hypothecation of crops without insisting on collateral security?

₹ 3.00 lakh Signup and view all the answers

What is the total crop loan limit for the first year?

₹ 14,300 Signup and view all the answers

What is the cost of one milch animal?

₹ 15,000 Signup and view all the answers

What is the 2nd year composite KCC limit?

₹ 30,730 Signup and view all the answers

What is the percentage increase in the crop loan limit every year?

10% Signup and view all the answers

What is the maximum permissible limit for the composite KCC limit?

₹ 36,000 Signup and view all the answers

What is the 3rd year crop loan component?

₹ 17,300 Signup and view all the answers

What is the 5th year composite KCC limit?

₹ 35,930 Signup and view all the answers

What is the initial crop loan component?

₹ 11,000 Signup and view all the answers

How should the interest rate for agricultural advances be charged?

Uniformly, as per RBI guidelines Signup and view all the answers

What is the role of the National Payments Corporation of India (NPCI) in the KCC Scheme?

To design the KCC card for all banks Signup and view all the answers

What should be done when a farmer applies for a loan against a warehouse receipt of their produce?

The request should be considered as per established procedure and guidelines Signup and view all the answers

What is the purpose of linking the loan against a warehouse receipt to the crop loan account?

To allow the farmer to settle the crop loan outstanding at the stage of disbursal of the pledge loan Signup and view all the answers

What is the basis for determining the scale of finance for a crop?

The type of crop being cultivated Signup and view all the answers

What is the purpose of the documentation required by banks?

As per banks internal guidelines Signup and view all the answers

What is the relevance of the Master Directions on Income Recognition, Asset Classification and Provisioning Norms?

To guide banks in their lending decisions Signup and view all the answers

What is the benefit of linking the loan against a warehouse receipt to the crop loan account?

The farmer can settle the crop loan outstanding at the stage of disbursal of the pledge loan Signup and view all the answers

Study Notes

KCC Scheme Guidelines

When the proposed extension is beyond one crop season, the aggregate of debits for which extension is granted is to be transferred to a separate term loan account with stipulation for repayment in installments.

Interest Rate

The rate of interest will be as stipulated in DBR Master Directions on Interest Rate on Advances.

Repayment Period

The repayment period may be fixed by banks as per the anticipated harvesting and marketing period for the crops for which the loan has been granted.
The term loan component will be normally repayable within a period of 5 years, depending on the type of activity/investment.
Financing banks may, at their discretion, provide a longer repayment period for term loan depending on the type of investment.

Margin

To be decided by banks.

Security

Security will be applicable as per RBI guidelines prescribed from time to time.
For KCC limit up to ₹ 1.00 lakh, banks are to waive margin/security requirements.
For loans up to ₹ 3.00 lakh, banks may consider sanctioning loans on hypothecation of crops without insisting on collateral security.

Other Conditions

Charging of interest is to be done uniformly as applicable to agricultural advances.
Processing fee, inspection charges, and other charges may be decided by banks.
In case the farmer applies for a loan against the warehouse receipt of his produce, the banks would consider such requests as per the established procedure and guidelines.
The National Payments Corporation of India (NPCI) will design the KCC card to be adopted by all the banks with their branding.
Documentation as per banks' internal guidelines.

Illustration of KCC Card Limit Calculation

Small farmer cultivating multiple crops in a year (2 acres).
Cropping pattern: Paddy - 1 acre, Sugarcane - 1 acre.
Investment/Allied Activities: Establishment of 1+1 Dairy Unit, Replacement of Pump set.
Assessment of Card Limit: Crop loan component, Term Loan Component, and Composite KCC Limit.
Calculation of Card Limit for each year, considering cost escalation/increase in scale of finance.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Description

This quiz covers banking regulations and policies, including loan extensions and repayment terms. It also touches on the Rationalisation of Branch Authorisation Policy and guidelines.