RBI activates relief package

The Reserve Bank of India (RBI) today activated its standing relief package for implementation in the tsunami-affected region along the country's east coast.

The package requires banks to waive penal interest for default of current dues and deferment of compounding of interest. In addition, banks have also been asked to expeditiously restore banking services in the affected areas.

The measures covered by the package include conversion and rescheduling/restructuring of existing loans in the case of crop failure.

The RBI also set up a task force headed by Deputy Governor V Leeladhar to monitor the progress of relief and rehabilitation measures through banks in the states of Tamil Nadu, Andhra Pradesh, Kerala and the Union Territories of Pondicherry and Andaman and Nicobar Islands.

Banks have been instructed to view the cases of the tsunami-affected people sympathetically while charging interest rate on fresh term loans for developmental purposes.

The beneficiaries of the package would include affected agriculturists, small-scale industrial units, artisans, small businesses and trading establishments.

The RBI's relief package comes into effect the moment the governments declare the region as calamity-hit. The measures also include consumption loans to persons affected for sustenance, waiver of margin requirements or considering as margin the grants, subsidies provided by state governments, provision of credit not only to existing borrowers but also to other eligible persons.

The RBI said the task force will constantly review the situation to see if any further measures are required to give relief to those affected.

The RBI has asked the banks to immediately convene a state-level Bankers' Committee meeting to discuss the effect of tsunami in their respective areas and to recommend any special measures that might be required in addition to its relief package. The RBI has also asked its regional directors in the affected states to co-ordinate with the state governments in this matter.

National Bank for Agricultural and Rural Development (NABARD) Chairman Ranjana Kumar said a joint meeting with commercial banks and regional rural banks will be convened soon to come to an understanding as to the kind and extent of relief the affected people will need.

She said, "We will have to work with bankers and government officials at the operational level for assessing the situation on the ground. A relief package can be planned only after a proper assessment."

The central government already has in place a relief package for farmers affected by natural calamities for the second consecutive year.

The package provides for clubbing of the principal loan amount outstanding and the interest overdue and making it repayable over a five-year period after a two year moratorium.

The interest on the restructured loan also gets realigned to the current rate under the package. On top of it, the affected can avail of another loan when the previous loan is still outstanding.