The Reserve Bank of India (RBI) has overhauled the framework for Banks for handling loans affected by natural disasters in a bid to streamline relief measures and ensure faster support to borrowers.
The new rules titled “Resolution of Accounts Impacted by Calamities,” under the “Reserve Bank of India (Commercial Banks – Resolution of Stressed Assets) Second Amendment Directions, 2026,” outline how banks should respond when borrowers face financial distress due to events such as floods, earthquakes, or civil disturbances.
A “natural calamity” is as any event recognized under official disaster relief frameworks such as the National or State Disaster Response Funds. The revised framework extends beyond natural disasters to include external disruptions like riots that significantly impact economic activity.
New guidelines
Under the new guidelines, only those borrowers whose accounts are classified as ‘Standard’, but which are not in default for more than 30 days with the bank in respect of any of their facilities, as on the date of occurrence of the calamity will be eligible for relief under this specific framework.
Banks are required to act swiftly, requiring them to invoke resolution plans within 45 days of the calamity’s declaration and implemented within 135 days.
Further, Banks are no longer required to wait for borrowers to formally request relief. They may initiate restructuring on their own, based on recommendations from State Level Bankers’ Committees (SLBCs), Union Territory Level Bankers’ Committee (UTLBC) / District Consultative Committee (DCC).
However, borrowers retain the right to opt out of such plans within the implementation window.
The RBI has also mandated that banks incorporate detailed policies for such resolutions, including clear criteria for relief, types of assistance offered, and internal approval mechanisms.
Relief measures may include rescheduling loan repayments, conversion of any interest accrued or to be accrued into another credit facility, etc. based on an assessment of the viability prospects of the borrower, etc. , depending on the borrower’s viability.
Additional provisions ensure that insurance payouts, where applicable, are factored into restructuring decisions. Banks have also been directed to align their relief measures with government schemes such as interest subvention programs.
Published on April 29, 2026