Natural Calamity Disrupted Your Loan Repayment? RBI Rules Require Banks To Offer Relief

In case a flood, cyclone, earthquake, or any other notified natural calamity makes it difficult for you to pay off your bank loan, you can request certain relief measures under the Reserve Bank of India's (RBI) framework, including moratorium, restructuring of loans and getting additional finance.

Replying to a question in the Lok Sabha, Minister of State for Finance Pankaj Chaudhary has stated that banks extend relief under board-approved policies guided by RBI's Master Direction on Relief Measures by Banks in Areas Affected by Natural Calamities, 2018 and the Master Directions on Resolution of Stressed Assets, 2025, including amendments issued on April 29, 2026.

What Kind Of Relief Can Borrowers Get

According to the government, banks can provide several relief measures depending on the extent of financial stress caused by the calamity. These include extending the loan tenure, converting short-term loans into long-term loans, converting unpaid interest into a Funded Interest Term Loan (FITL), deferring EMIs, granting a moratorium, rescheduling term loans and providing additional finance.

These measures are implemented through a resolution plan after considering recommendations of the State Level Bankers' Committee (SLBC), Union Territory Level Bankers' Committee (UTLBC) or District Consultative Committee (DCC).

Restructuring and fresh loans can be approved without waiting for insurance claims to be settled. However, insurance proceeds and any government relief already received must be factored into the resolution plan while deciding the final assistance.

What Is Not Covered

The government has stated that fire incidents are generally not treated as natural calamities for the purpose of banking relief.

However, it has been noted that relief may be considered if a fire forms part of a larger notified disaster or is specifically recognised by the competent authority. In such cases, assistance is extended on a case-by-case basis following recommendations of the SLBC, UTLBC or DCC.

Banks Must Act Within Set Timeline

The government has noted that RBI's new guidelines, which took effect from July 1, 2026, stipulate specific timelines for providing relief following a calamity.

The SLBC, UTLBC or DCC convenor bank must hold a special meeting within 15 days of the declaration. Banks must invoke a resolution plan within 45 days and implement it within 135 days.

Eligible borrowers must also receive interest subvention and prompt repayment incentives wherever applicable.

The government has further stated that public sector banks have not reported any cases where loan accounts turned into non-performing assets solely because timely banking relief was not provided after a natural calamity. It has been added that the prescribed timelines and restructuring measures are intended to reduce financial stress and help prevent eligible borrowers' accounts from slipping into NPA status.