Loan Resolution in Calamities Can Be Initiated by Banks Without Requests: RBI

The Reserve Bank of India has allowed banks and other lenders to put in place loan resolution plans for borrowers affected by natural calamities without waiting for formal requests, as per news reports.  

The decision follows feedback on draft norms and will be applicable from 1 July 2026. The earlier rollout had been scheduled for April. 

Applicability Across Lenders 

The directions cover commercial banks, small finance banks, cooperative banks, local area banks, non-banking financial companies, and All India Financial Institutions.  

The framework is intended for areas officially recognised as affected by natural calamities under government disaster relief mechanisms. 

Banks may act based on recommendations from the State Level Bankers’ Committee or other competent authorities to initiate relief measures. 

Eligibility Criteria 

Only standard loan accounts are eligible under the framework. These accounts should not be overdue by more than 30 days as on the date of the calamity.  

Accounts meeting this condition can retain their standard classification after restructuring. 

In cases where an account turns non-performing between the disaster date and the implementation of the plan, it may be upgraded to standard upon resolution. 

Types of Relief Measures 

Lenders may offer relief in different forms depending on the borrower’s situation. These include rescheduling of loan repayments, granting moratoriums, and converting unpaid interest into a separate facility. 

Banks may also extend additional finance where required, subject to an assessment of the borrower’s repayment capacity. 

Timelines and Process 

The framework sets clear timelines for implementation. Resolution plans must be invoked within 45 days from the date of the calamity declaration and completed within 135 days. 

If banks are unable to meet the invocation timeline, a one-time extension of up to 30 days can be requested through the State Level Bankers’ Committee from the Reserve Bank’s regional office. 

Borrowers have the option to opt out of the resolution within 135 days from the date of declaration. 

Read More: India Plans ₹51,383 Crore Push to Add 62 Ships in FY27! 

Conclusion 

The revised norms set out a standard process for extending relief in calamity-affected areas, with defined eligibility conditions and timelines for lenders. 

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