Summary of this article
RBI has allowed banks to extend relief without borrower requests
Borrowers have been given opt-out option within 135 days
Additional 5 per cent provisioning has been mandated for restructured
The Reserve Bank of India (RBI) has permitted banks and financial institutions to extend relief measures to borrowers in disaster-stricken regions without waiting for any official request, under the new guidelines that would be applicable from July 1, 2026.
The directions have followed feedback received from stakeholders on draft norms issued earlier this year. The central bank has finalised a framework applicable to commercial banks, small finance banks (SFBs), cooperative banks, non-banking financial companies (NBFCs), and All India Financial Institutions (AIFIs). It has also issued two repeal directions alongside the updated norms.
Under the revised guidelines, lenders have been allowed to roll out relief measures to all eligible borrowers in areas affected by natural disasters. However, borrowers have been given the option to opt out at any point within 135 days from the date a calamity has been officially declared.
Operational Flexibility For Banks In Affected Areas
RBI has provided operational flexibility to banks in disaster-hit regions. Lenders have been allowed to operate affected branches from temporary premises after informing the concerned regional office of the central bank.
Banks have been advised to ensure continuity of services by setting up satellite offices, extension counters, or mobile banking facilities. They have also been required to restore ATM services at the earliest. Until then, alternative arrangements have to be made to meet immediate cash requirements in affected areas.
Relief Measures And Eligibility Criteria
Banks have been allowed to offer relief such as waiver or reduction of fees and charges for customers in notified calamity-hit areas for a period of up to one year.
The framework has specified that only borrowers with ‘Standard’ accounts have been eligible for resolution. These are accounts that have not been overdue for more than 30 days as of the date of occurrence of the calamity. RBI has said the objective has been to support borrowers impacted by natural events, but not otherwise under financial stress.
In cases where borrower accounts have slipped into non-performing asset (NPA) status between the date of the calamity and the implementation of a resolution plan, such accounts have been allowed to be upgraded to ‘Standard’ upon successful implementation of the plan.
Provisioning Norms And Stakeholder Feedback
The revised framework has mandated that banks have to make an additional provision of 5 per cent on the outstanding debt for accounts where a resolution plan has been implemented. This has been over and above applicable prudential provisioning norms, subject to a cap of 100 per cent.
Some stakeholders have suggested reducing this additional provisioning requirement to nil or capping it at 2 per cent. RBI has not accepted this suggestion, stating that the additional provision has been meant to address the higher risk associated with such accounts without applying stricter norms used for regular restructured loans.
During the consultation process, stakeholders have also proposed expanding eligibility to include all ‘Standard’ borrowers, including those overdue by up to 89 days. RBI has not accepted this suggestion, reiterating that relief has been intended for borrowers who have not been otherwise stressed.
The central bank has said the revised framework has been more relaxed than the existing norms and has aimed to harmonise regulatory instructions across different regulated entities (REs).
