RBI outlines resolution framework for loans hit by natural calamities

The Reserve Bank of India (RBI) has framed a principle-based resolution regime for borrowers impacted by natural calamities, giving regulated entities (REs) operational flexibility to design and implement relief measures.

 

The framework also factors in decisions of the State Level Bankers’ Committee (SLBC) and District Consultative Committee (DCC).

 

As per the guidelines, exposures affected by a natural calamity and classified as ‘standard’, and not in default for up to 30 days (SMA-0) on the date of the event, will be eligible for relief.

 

The resolution plan to be implemented by a bank may include rescheduling of payments; conversion of any interest accrued or to be accrued into another credit facility; granting of a moratorium, etc, based on an assessment of the viability prospects of the borrower.

 

 

It may also include a proposal for sanctioning additional finance to address the financial stress of the borrower, subject to due assessment of the viability prospects of the borrower.

 

To ensure timely rollout, the central bank has prescribed a dedicated window for invocation of the framework and a separate window for implementation of the resolution plan (RP).

 

Accounts restructured under the relief package will continue to be classified as ‘standard’, with income recognised on an accrual basis. These exposures will also attract lower additional provisioning compared to other restructured assets.

 

Further, REs have been asked to make alternate arrangements to maintain continuity of banking services in calamity-affected areas.

 

The guidelines will come into force from April 1, 2026.