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Scheduled commercial banks must provide relief measures to borrowers in areas affected by natural calamities when crop loss reaches thirty-three percent or more. Banks must restructure short-term crop loans and long-term investment loans, grant fresh loans, and relax Know Your Customer norms for small accounts. The affected borrower receives a moratorium period of at least one year on restructured loans. The repayment period extends up to two years for crop loss between thirty-three and fifty percent, and up to five years for crop loss of fifty percent or more. Banks must complete restructuring within three months from the date of the natural calamity to maintain standard asset classification. These directions apply to scheduled commercial banks excluding regional rural banks.
What you must do
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Thresholds
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Ask about this master direction
RBI/FIDD/2017-2018/55 Master Direction FIDD.CO.FSD.BC No.8/05.10.001/2017-18 July 03, 2017
The Chairman/Managing Director/Chief Executive Officer All scheduled commercial banks (including Small Finance Banks and excluding Regional Rural Banks)
Madam / Sir,
Master Direction – Reserve Bank of India (Relief Measures by banks in areas affected by Natural Calamities) Directions 2017
Please refer to our ‘Master Direction FIDD.No.FSD.BC.2/05.10.001/2016-17 dated July 1, 2016’ incorporating guidelines issued to banks in regard to matters relating to relief measures to be provided in areas affected by natural calamity.
This Master Direction consolidates all the guidelines issued on the subject till date. The list of circulars compiled into this Master Direction is given in the Appendix.
Please acknowledge receipt.
Yours faithfully,
(Ajay Kumar Misra) Chief General Manager
Master Direction - Reserve Bank of India (Relief Measures by Banks in Areas Affected by Natural Calamities) Directions, 2017
In exercise of the powers conferred under Sections 21 and 35A of the Banking Regulation Act, 1949, the Reserve Bank of India being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified.
CHAPTER I
PRELIMINARY
1.1 Short Title and Commencement.
1.2. Applicability The provisions of these Directions shall apply to every Scheduled Commercial Bank {including Small Finance Banks (SFBs) and excluding Regional Rural Banks(RRBs)} licensed to operate in India by Reserve Bank of India.
CHAPTER II
BACKGROUND
2.1 Periodical but frequent occurrence of natural calamity takes a heavy toll on human life and cause wide spread damage to economic pursuits in one or the other part of the country. The devastation caused by natural calamities calls for massive rehabilitation effort from all agencies. The Central, State and local authorities draw programmes on economic rehabilitation for the people affected by natural calamities. The developmental role assigned to the commercial banks including Small Finance Banks warrant their active support in reviving the economic activities of those affected by the occurrence of a natural calamity.
2.2 In terms of the National Disaster Management Framework, there are two funds constituted viz. National Disaster Response Fund (NDRF) and State Disaster Response Fund (SDRF) for providing relief in the affected areas. This framework currently recognizes 12 types of natural calamities viz. cyclone, drought, earthquake, fire, flood, tsunami, hailstorm, landslide, avalanche, cloud burst, pest attack and cold wave/frost. Out of these 12, for 4 calamities i.e. drought, hailstorms, pest attack and cold wave/frost, the Ministry of Agriculture is the nodal point and for the remaining 8, the Ministry of Home Affairs is the nodal ministry to make the necessary administrative arrangements. A slew of measures for relief are undertaken by the Sovereign (Central/State Government) from time to time to provide relief to the affected people including, inter alia, provision for input subsidies, financial assistance to farmers including small and marginal farmers.
2.3 The role of the scheduled commercial banks including Small Finance Banks (SFBs) is to provide relief measure through rescheduling existing loans and sanctioning fresh loans as per the emerging requirement of the borrowers. To enable banks to take uniform and concerted action expeditiously, these directions are issued covering four aspects viz. Institutional Framework (Chapter III), Restructuring of Existing Loans (Chapter IV), Providing Fresh Loans (Chapter V) and Other Ancillary Relief Measures (Chapter VI).
CHAPTER III
INSTITUTIONAL FRAMEWORK
3.1 Establishing Policy/Procedures for dealing with Natural Calamities The area, time of occurrence and intensity of the natural calamity cannot be anticipated. It is, therefore, imperative that banks have a blueprint of action duly approved by the Board of Directors for such eventualities so that the required relief and assistance is provided with utmost speed and without any loss of time. Further, all Divisional/Zonal Offices and branches of Scheduled Commercial/Small Finance banks should be familiar with these standing instructions. These standing instructions will immediately come to force after the district/state authorities put in place the requisite declaration. It is essential that these instructions should also be made available to the State Government authorities and all the District Collectors so that all concerned are aware about the action that should be taken by the concerned authorities in the affected area.
3.2 Discretionary Powers to Divisional / Zonal Manager of banks The Divisional/Zonal Managers of scheduled commercial/SF banks must be vested with certain discretionary powers to avoid the need to seek fresh approval from their Central Office regarding the line of action decided by the District Consultative Committee/State Level Bankers’ Committee. Some of the areas, among others where such discretionary powers are vital may be the adoption of scale of finance, extension of loan period, margin, security, sanction of new loan keeping in view the total liability of the borrower arising out of the old loan where the asset financed is damaged or lost due to the natural calamity and the new loan financed for creation/repair of such asset(s).
3.3 Meeting of State Level Bankers’ Committee (SLBC)/District Consultative Committee (DCC)
3.3.1 In the event of an occurrence of a natural calamity which covers a larger part of a State, the State Level Bankers’ Committee convener bank should convene a meeting immediately. The committee, in collaboration with the State Government authorities should evolve a coordinated action plan for implementing the relief programme. If the calamity has affected only a small part of the state/few districts, the convener of the District Consultative Committee of the affected district(s) should convene a meeting immediately. In the special SLBC/DCC meeting, the position of the affected areas may be assessed so as to ensure speedy formulation and implementation of suitable relief measures.
3.3.2 In the areas where the calamity is severe, the relief measure(s) implemented should be reviewed periodically through a specially constituted Task Force/Sub-Committee by way of weekly/fortnightly meetings as decided by the SLBC/DCC.
3.4 Declaration of Natural Calamity
3.4.1 It is recognised that declaration of a natural calamity is in the domain of the Sovereign (Central / State Governments). The inputs received from the State Governments reveal that there are no uniform procedures being followed for declaration of natural calamity and issue of declarations / certificates. These declarations/certificates are called by different names such as Annewari, Paisewari, Girdawari, etc. in different States. Nevertheless, the common thread to extend relief measures including reschedulement of loans by banks, is that the crop loss assessed should be 33% or more. For assessing this loss, while some States are conducting crop cutting experiments to determine the loss in crop yield, some others are relying on the eye estimates/visual impressions.
3.4.2 In case of extreme situations such as wide-spread floods, etc. when it is largely clear that most of the standing crops have been damaged and/or land and other assets have suffered a wide-spread damage, the matter be deliberated by State Government/District Authorities in the especially convened SLBC/DCC meetings where the concerned Government functionary/District Collector may explain the reasons for not estimating ‘Annewari’ (percentage of crop loss – by whatever name called) through crop cutting experiments and that the decision to provide relief for the affected populace needs to be taken based on the eye estimate/visual impressions.
