Renewal of agricultural loans requires compliance with repayment terms as per the RBI Master Circular.

JUDGMENT

[WP(C) Nos.32373/2025, 32210/2025, 32242/2025 and 32331/2025]

(Dated this the 5^th day of February 2026)

The petitioners in all these Petitions have availed crop loan/term loan for agricultural allied activities to the tune of Rs.30 lakhs in 2017 from the 3^rd respondent bank. The primary security for the loan is the standing crops in the property. 25.50 cents of land and a multi-storeyed building therein in the name of M/s.Vyshakh International Hotel Private Limited was also offered as security. According to the petitioners, the loan accounts were properly maintained and were being renewed from time to time, and there are no arrears due to the bank. But surprisingly, the 3^rd respondent bank had served a notice to the petitioners stating that the petitioners have failed to make the payment of principal and interest and other charges due to the bank, and hence, the loan account has been classified as Non Performing Asset (NPA).

2. On receipt of the notices, petitioners approached the bank, and it was learnt that the classification of the account is not due to any arrears but for non - renewal of the agricultural loan. Even after the accounts were classified as NPA, petitioners have applied for renewal of the loan and submitted all documents, including the latest tax receipts, possession certificates, encumbrance certificates and other revenue records necessary for renewal of the facility, but the bank has not taken any steps to renew the facility. In the meanwhile the demand notice under Section 13(2) of the SARFAESI Act was issued calling upon the petitioners to remit the amount due to the bank.

3. The agricultural credit facility sanctioned was renewed every year by remitting the yearly interest due without any default. Even on 3.5.2025, petitioners remitted Rs.3.5 lakhs towards interest and the same is received by respondent Nos.2 and 3. To the notice under Section 13(2), petitioners filed a reply stating that the classification of the petitioners’ account is vitiated with gross irregularities. An account can be classified as NPA only if there is any default in repayment of secured assets or any other instalment to the loan account.

4. As per Ext.P7 Master Circular of the RBI, as far as agricultural advances are concerned, a loan granted for short duration crop will be treated as NPA, if the instalment of the principal or interest thereon remains overdue for two crop seasons and the loan granted for long duration crops will be treated as NPA, if the instalment of principal or interest thereon remains overdue for one crop season. In the objection to the notice under Section 13(2), petitioners have specifically stated that they are prepared to pay the overdue amount in order to upgrade the standard account.

5. When the account was classified as NPA, the petitioners moved this court by filing W.P.(C.) No.14999 of 2025 and connected cases, and this court by Ext.P9 judgment, disposed of the same, directing the petitioners to approach the bank either to seek an extension of KCC limits or to take such steps to regularise the loan account in terms of the Master Circular issued by RBI.

6. In compliance with the direction, the petitioners approached the bank and submitted Ext.P10 application. On 12.08.2025, petitioners received a letter, which is produced as Ext.P11, stating that the KCC limit is valid for 5 years, subject to annual review and since the facility has originally surpassed the original validity period of 5 years, a full-fledged renewal is warranted in accordance with applicable norms. The petitioners were directed to submit formal applications, and after clearing the entire outstanding dues, inc