NPA Classification for Agricultural and Allied Loans: RBI Master Circular 2025 and the Nov 2025 Directions
A short-duration crop loan becomes an NPA when its instalment of principal or interest stays overdue for two crop seasons; a long-duration crop loan becomes one after one crop season. That crop-season test applies only to the farm-credit activities listed in Annex-2 of the Master Circular. Loans outside that list, which on a plain reading includes dairy, poultry and fishery finance, are tested on the ordinary 90-day norm.
This guide is for statutory and concurrent auditors and CA firms testing agricultural portfolios in commercial banks. It is based on the RBI Master Circular dated 1 April 2025 and the Directions that followed it. It is a working note, not legal advice.
Last reviewed: 26 September 2026, against the circular text described below. Check the current RBI text before you sign off.
Which RBI document governs agricultural NPA classification today?
Two documents matter, and they overlap.
| Document | Reference | Date | Status |
|---|---|---|---|
| Master Circular, Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances | RBI/2025-26/13, DOR.STR.REC.9/21.04.048/2025-26 | 1 April 2025 | Addressed to all commercial banks excluding RRBs. Consolidates instructions up to 31 March 2025 and states it contains no new instructions. |
| Reserve Bank of India (Commercial Banks - Income Recognition, Asset Classification and Provisioning) Directions, 2025 | RBI/DOR/2025-26/164, DOR.STR.REC.83./21.04.048/2025-26 | 28 November 2025 | In force with immediate effect. |
The paragraph references below are to the 1 April 2025 Master Circular, checked against the RBI PDF. The November 2025 Directions carry the same crop-season rules at paragraphs 42(6), 42(7) and 57, according to a published copy of the text. The Directions may replace the April 2025 Master Circular, so confirm those paragraph numbers and any repeal wording on rbi.org.in before quoting them in a report.
When does an agricultural loan become an NPA?
Paragraph 2.1.2 (iv) and (v) of the Master Circular gives the rule, and paragraph 4.2.13.1 explains it:
| Loan type | NPA when the instalment of principal or interest is overdue for |
|---|---|
| Short-duration crops | Two crop seasons |
| Long-duration crops | One crop season |
| Any other term loan | More than 90 days |
Paragraph 4.2.13.1 defines the terms:
- "Long duration" crops are crops with a crop season longer than one year.
- Any crop that is not "long duration" is treated as "short duration".
- The crop season is the period up to harvesting of the crops raised, as determined by the State Level Bankers' Committee (SLBC) in each state.
- Depending on the crops raised by the farmer, the same norms also apply to agricultural term loans he has taken.
For audit, this means the SLBC crop calendar for the state is your primary test evidence. Without it you cannot recompute the NPA date.
Do allied activities like dairy, poultry and fisheries get the crop-season relief?
On the text of the Master Circular, no. Paragraph 4.2.13.2 says the crop-season norms apply only to Farm Credit for the agricultural activities listed at Annex-2. It adds that for agricultural loans other than those in Annex-2, NPAs are identified on the same basis as non-agricultural advances, which it describes as the 90-day delinquency norm.
The word "allied" does not appear anywhere in the circular text I read, and Annex-2 lists no dairy, poultry, fishery or other allied activity. So the safe working position is:
- Annex-2 activity: crop-season test.
- Anything else, including allied activities: 90 days.
One caution. A bank may have a documented internal mapping of a specific product to Annex-2, for example an allied loan bundled inside a Kisan Credit Card limit. Ask for that mapping and the sanction terms rather than assuming either way. If a bank applies the crop-season test to a product that is not in Annex-2, treat it as a finding to raise, not a settled point.
Which loans are inside Annex-2?
Annex-2 is titled "Activities eligible for crop season linked asset classification norms". It has three parts.
| Part | Borrower | Covered activities (summary) |
|---|---|---|
| A | Individual farmers, including SHGs or JLGs of individual farmers where the bank keeps disaggregated data | Crop loans (including plantations and horticulture); medium and long-term farm loans; pre and post-harvest activities on own produce; loans up to Rs 60 lakh against pledge or hypothecation of produce (including warehouse receipts) for up to 12 months; loans to distressed farmers indebted to non-institutional lenders; Kisan Credit Card loans; loans to small and marginal farmers to buy agricultural land |
| B | Corporate farmers, FPOs or FPCs of individual farmers, partnership firms and farmer co-operatives, directly engaged in agriculture, up to an aggregate Rs 4 crore per borrower | Crop loans; medium and long-term farm loans; pre and post-harvest activities; loans up to Rs 2.5 crore against produce for up to 12 months |
| C | Bank loans to PACS, FSS and LAMPS | On-lending to agriculture |
The exposure caps matter. A corporate farmer with Rs 6 crore of aggregate farm credit is above the Part B limit, so the audit question is whether the crop-season test was applied to an exposure that does not qualify.
Loans to PACS or FSS under on-lending: under paragraph 4.2.10, only the specific facility in default for two crop seasons (short duration) or one (long duration) is classified as NPA, not every facility to the society. Direct loans to a society's member borrowers outside the on-lending arrangement become NPA even if only one of that borrower's facilities does.
What changes after a natural calamity?
Paragraphs 4.2.13.3 and 4.2.13.4 allow banks, where a natural calamity has impaired repaying capacity for Annex-2 purposes, to convert a short-term production loan into a term loan, reschedule repayment, and sanction a fresh short-term loan, subject to the Master Direction on Relief Measures by Banks in Areas affected by Natural Calamities, 2018 as updated. The converted term loan and the fresh loan may be treated as current dues and need not be classified as NPA. Their later classification follows the revised terms, with the same two-season or one-season test.
For standard-asset provisioning, paragraph 5.5.1(f) sets 5 per cent on advances restructured and classified as standard under that same Direction. Check that the bank has actually made this higher provision, not just the 0.25 per cent.
What provision applies to agricultural loans?
| Category | Provision | Reference |
|---|---|---|
| Standard, farm credit to agricultural activities | 0.25 per cent of funded outstanding | Para 5.5.1(a) |
| Standard, other loans not in a specific bucket | 0.40 per cent | Para 5.5.1(g) |
| Standard, restructured under natural-calamity Direction | 5 per cent | Para 5.5.1(f) |
| Substandard | 15 per cent of total outstanding, with no allowance for ECGC cover or securities | Para 5.4.1 |
| Substandard, unsecured exposure | Additional 10 per cent, 25 per cent in total | Para 5.4.2 |
| Doubtful, unsecured portion | 100 per cent of the extent not covered by realisable security | Para 5.3.1 |
| Doubtful, secured portion, up to one year | 25 per cent | Para 5.3.2 |
| Doubtful, secured portion, one to three years | 40 per cent | Para 5.3.2 |
| Doubtful, secured portion, more than three years | 100 per cent | Para 5.3.2 |
| Loss | Write off, or provide 100 per cent | Para 5.2 |
Paragraph 8.3 excludes crop-season agricultural advances from SMA-0/1/2 staging, so do not expect SMA tags on them. A substandard asset has been an NPA for 12 months or less; it turns doubtful after that (paragraphs 4.1.1, 4.1.2).
Worked example: one loan in each bucket
A. Short-duration crop loan (Annex-2 activity). A farmer has Rs 8,00,000 outstanding, with realisable security of Rs 5,00,000. The instalment fell due after the kharif harvest and stayed unpaid through the rabi season as well, so it is overdue for two crop seasons on the SLBC calendar.
- Classified as NPA: substandard.
- Provision at 15 per cent of Rs 8,00,000 = Rs 1,20,000.
- After 12 months in substandard it becomes doubtful. The unsecured portion (Rs 8,00,000 less Rs 5,00,000 = Rs 3,00,000) is provided at 100 per cent = Rs 3,00,000. The secured portion of Rs 5,00,000 is provided at 25 per cent in the first year of doubtful = Rs 1,25,000. Total = Rs 4,25,000.
B. Dairy loan (not in Annex-2). A dairy loan of Rs 6,00,000 has an instalment due on 10 January 2026 that remains unpaid. Day 90 is 10 April 2026, so the account is overdue for more than 90 days on 11 April 2026 and is an NPA from that date. Provision at 15 per cent of Rs 6,00,000 = Rs 90,000 as substandard. Under paragraph 8.4, the NPA date is the calendar date on which the day-end process is run.
The same defaulter, tested wrongly under the crop-season rule, would show as standard for months more. That gap is the finding.
What should an auditor test on agricultural NPAs?
- Take the loan sanction and confirm whether the purpose maps to Annex-2 Part A, B or C, and whether the Part B Rs 4 crore cap was respected.
- Obtain the SLBC crop calendar for the state and crop, and recompute the overdue period in crop seasons.
- Check crop duration tagging. A crop season longer than one year is long duration.
- For allied and non-Annex-2 loans, recompute the 90-day test from the due date.
- Check upgradation. Under paragraph 4.2.5 an NPA account is upgraded to standard only when the entire arrears of interest and principal are paid, across all facilities of the borrower.
- Recompute provisions using security values, and confirm the standard-asset rate of 0.25 per cent on farm credit.
For a wider bank-audit programme, see our bank audit guide for CA firms and the note on ICAI tools for AI in bank audit.
Can I run a quick check on one account?
Yes. The NPA classification calculator on CORAA takes an advance, applies the 90-day test, the out-of-order test for CC/OD and the crop-season test for agricultural advances, and shows the staging and provision. It is a way to sanity-check a sample item, not a substitute for the SLBC calendar or the bank's records.
Frequently asked questions
When does an agricultural loan become an NPA under the RBI Master Circular?
A short-duration crop loan becomes an NPA when the instalment of principal or interest is overdue for two crop seasons. A long-duration crop loan becomes one when it is overdue for one crop season (paragraph 2.1.2 and 4.2.13.1 of the 1 April 2025 Master Circular).
Do dairy, poultry and fishery loans get the two-crop-season relief?
On the circular text, only Annex-2 farm credit does. Loans outside Annex-2 are identified as NPA on the same basis as non-agricultural advances, which is the 90-day norm (paragraph 4.2.13.2). Ask the bank for its product mapping before concluding.
What provision applies to a substandard agricultural NPA?
15 per cent of the total outstanding, with no allowance for ECGC cover or securities (paragraph 5.4.1). An unsecured substandard exposure attracts 25 per cent in total (paragraph 5.4.2).
What provision applies to standard agricultural loans?
0.25 per cent of funded outstanding on farm credit to agricultural activities (paragraph 5.5.1(a)). Loans restructured as standard under the natural-calamity Direction attract 5 per cent (paragraph 5.5.1(f)).
Did the November 2025 Directions change the crop-season rule?
The Directions dated 28 November 2025 (RBI/DOR/2025-26/164) carry the two-season and one-season test, at paragraphs 42(6), 42(7) and 57 as reproduced in a published copy. The April 2025 circular said it contained no new instructions. Read the current RBI text for any later amendments before you report.
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Sources: RBI Master Circular RBI/2025-26/13 dated 1 April 2025 (paragraphs 2.1.2, 4.1, 4.2.5, 4.2.6, 4.2.10, 4.2.13, 5.2 to 5.5, 8.3, 8.4 and Annex-2); RBI Directions RBI/DOR/2025-26/164 dated 28 November 2025.