RBI’s new disaster loan relief rules explained: Banks can help borrowers automatically; what changes from July 1

Banks will be allowed to extend relief measures to borrowers in calamity-hit areas without waiting for individual requests, under revised Reserve Bank of India guidelines that will come into force from July 1, 2026.The RBI on Wednesday issued fresh directions after considering stakeholder feedback on draft norms covering relief measures in areas affected by natural calamities. The framework applies to commercial banks, small finance banks, local area banks, cooperative banks, NBFCs and All India Financial Institutions, PTI reported.“Lenders are permitted to extend the 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,” the RBI said.Under the revised norms, 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,” the central bank said.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.Borrowers will be eligible for resolution if their accounts are classified as “Standard” and are not overdue by more than 30 days with the lender on the date the calamity occurred.“Borrower accounts, which 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,” the RBI said.The central bank has also 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.The RBI said one suggestion during consultation was to relax eligibility norms to cover all standard borrowers overdue up to 89 days.Rejecting the proposal, it said the objective was to help borrowers affected by natural calamities who were otherwise not under stress.“In any case, the revised framework is more relaxed than the extant norms,” it added.Stakeholders had also proposed reducing the extra provisioning requirement to nil or capping it at 2 per cent instead of 5 per cent. The RBI declined, saying the provision appropriately balances the higher risk in such accounts while avoiding the steeper provisioning applicable to regular restructured accounts.The central bank had first proposed a harmonised framework for disaster-related loan resolution in June 2023.