RBI's New Framework for Disaster-Affected Borrowers

The Reserve Bank of India has introduced a dedicated framework for resolving loan accounts of borrowers affected by natural calamities and certain external disruptions. Through the Amendment Directions issued on April 29, 2026, a new Chapter VI-A has been inserted into the prudential framework governing resolution of stressed assets. The new provisions will come into effect from July 1, 2026.

The framework marks a significant regulatory shift. Earlier, relief measures granted to borrowers affected by disasters were dealt with under broader restructuring guidelines. The RBI has now created a separate mechanism that specifically addresses financial stress arising from calamities, while preserving prudential discipline within the banking system.

A Separate Framework for Calamity-Related Stress

The new chapter applies when a natural calamity or certain external events affecting economic activity are officially declared by the Central or State Government.

The framework covers situations such as:

A. Natural calamities recognised under the National Disaster Response Fund (NDRF) or State Disaster Response Fund (SDRF);

B. Riots or disturbances affecting economic activity; and

C. Other notified external disruptions falling within the governmental framework.

By linking eligibility to officially recognised calamities, the RBI has introduced greater consistency and reduced the scope for subjective interpretation by lenders.

Governance Through Board-Approved Policies

The Amendment Directions require banks to incorporate calamity-related resolution measures within their board-approved policies.

At a minimum, such policies must address:

A. The principles governing relief measures for different borrower categories;

B. The types of relief that may be granted and the parameters for determining eligibility; and

C. The delegation framework for approving and implementing relief measures, including restructuring and additional finance.

This requirement seeks to ensure that relief is provided through a structured and transparent process rather than through ad hoc decision-making.

Eligibility Criteria for Relief

Not every borrower affected by a calamity automatically qualifies for restructuring under the new framework.

Relief is available only where:

A. The account was classified as a standard asset; and

B. The borrower was not in default for more than 30 days in respect of any facility on the date of occurrence of the calamity.

This distinction is important because it limits the benefit of the framework to borrowers whose financial difficulties arise from the calamity itself rather than from pre-existing stress.

Borrowers who do not satisfy these conditions may still be considered under other provisions governing stressed asset resolution.

Role of SLBCs and DCCs

The framework assigns an important coordinating role to the State Level Bankers' Committee (SLBC), Union Territory Level Bankers' Committee (UTLBC) and District Consultative Committee (DCC).

Following declaration of a calamity:

A. The SLBC or UTLBC must convene a special meeting within 15 days where a substantial part of a State or Union Territory is affected;

B. The DCC must convene the meeting where only specific districts are affected; and

C. The committees may assess the impact of the calamity, formulate objective criteria for identifying affected borrowers and determine the need for relief measures, including any moratorium.

The decisions taken at these meetings are required to be circulated to relevant stakeholders and publicised for the benefit of affected borrowers.

Time-Bound Resolution Process

The RBI has prescribed strict timelines for implementation.

A resolution plan must:

A. Be invoked within 45 days from the declaration of the calamity; and

B. Be implemented within 135 days from the declaration.

In exceptional cases, a one-time extension of 30 days may be granted for invocation upon approval by the Reserve Bank.

These timelines are intended to ensure that assistance reaches borrowers while it remains meaningful.

Deemed Invocation and Borrower Choice

One of the most notable features of the framework is the concept of deemed invocation.

Banks are not required to wait for a formal request from the borrower. Following the recommendations of the SLBC, UTLBC or DCC, a bank may initiate a resolution plan on its own.

At the same time, the framework preserves borrower autonomy by allowing the borrower to opt out of the resolution plan at any point before the expiry of the implementation period.

This approach balances operational efficiency with borrower choice.

Relief Measures Available

The RBI has provided flexibility in designing resolution plans based on the circumstances of each borrower.

Relief measures may include:

A. Rescheduling of repayment obligations;

B. Conversion of accrued or future interest into another credit facility; and

C. Sanction of additional finance where required and considered viable.

This enables lenders to tailor relief measures to the nature and severity of the disruption faced by the borrower.

Ancillary Relief and Reporting Obligations

The framework also contains several practical measures intended to facilitate relief.

Banks may take into account insurance proceeds while restructuring accounts and may grant relief without waiting for actual receipt of insurance claims.

The framework further requires:

A. Extension of applicable interest subvention and prompt repayment incentive benefits;

B. Acceptance of alternative documentation for certain agricultural borrowers who have lost title records due to the calamity; and

C. Periodic reporting through the Centralised Information Management System (CIMS).

The reporting requirements are intended to improve regulatory oversight and facilitate monitoring of relief measures across the banking system.

A More Structured Response to Disaster-Related Stress

The new framework reflects the RBI's effort to create a dedicated and predictable mechanism for addressing financial stress caused by calamities. By introducing eligibility standards, governance requirements, defined timelines and borrower safeguards, the regulator has sought to ensure that relief reaches genuinely affected borrowers without compromising credit discipline.

For banks, the framework provides greater procedural clarity. For borrowers, it offers a structured avenue for relief during periods of severe disruption. Taken together, these measures represent a significant step towards a more organised and transparent approach to managing disaster-related financial stress.