RBI’s New Disaster Loan Relief Rules: A Game-Changer for Indian Borrowers
The Reserve Bank of India (RBI) has issued revised guidelines for disaster loan relief, which will come into force from July 1, 2026. The new rules aim to provide relief to borrowers affected by natural calamities, allowing banks to extend relief measures without waiting for individual requests.
Under the revised norms, Commercial Banks, small finance banks, local area banks, cooperative banks, NBFCs, and All India Financial Institutions will be permitted to extend relief measures to all borrowers in calamity-hit areas. This move is expected to provide much-needed support to borrowers who have been affected by natural disasters.
Key Features of the New Guidelines
The revised guidelines have several key features that will benefit borrowers. These include:
- Lenders are permitted to extend relief measures to all borrowers without waiting for a request from them, with an opt-out clause for such borrowers who desire to opt out at any point till the end of 135 days from the date of declaration of natural calamity.
- Banks may run calamity-hit branches from temporary premises after informing the concerned RBI regional office.
- They can also set up satellite offices, extension counters or mobile banking units in affected areas to continue services.
- A bank shall take immediate action for the restoration of ATM services at the earliest. During the period, it shall provide alternative arrangements to address the immediate cash requirements of the affected areas.
- Banks may also, at their discretion, offer relief such as waiver or reduction of fees and charges for customers in notified disaster-hit regions for a period of up to one year.
Eligibility Criteria for Borrowers
To be eligible for resolution, borrower accounts must be classified as ‘Standard’ and not overdue by more than 30 days with the lender on the date the calamity occurred. Borrower accounts that may have slipped into NPA between the date of occurrence of the calamity and implementation of the resolution plan shall be upgraded as ‘Standard’, upon implementation of the resolution plan.
For more information on Non-Performing Assets and their impact on borrowers, please visit our website.
Additional Provisioning Requirements
The central bank has required lenders to make an additional specific provision of 5 per cent of the outstanding debt for borrowers whose accounts are restructured under a resolution plan. This additional provision will be over and above existing prudential requirements, subject to a maximum of 100 per cent.
For more information on Provisioning Requirements and their impact on lenders, please visit our website.
Conclusion
The RBI’s new disaster loan relief rules are a welcome move for Indian borrowers who have been affected by natural calamities. The revised guidelines provide a framework for lenders to extend relief measures to borrowers without waiting for individual requests, and also provide additional support to borrowers who have been affected by natural disasters.
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