Follow relief norms during natural calamities: RBI to banks

RBI today asked banks to ensure full compliance with policies relating to relief measures such as rescheduling and sanctioning of loans as well as restoring ATMs, in areas affected by drought and other natural calamities.
The direction follows a Supreme Court order -- on a Writ Petition by Swaraj Abhiyan against Union of India and others -- wherein it asked the central government, states and Reserve Bank as well as other banks to "religiously implement their policies since they are ultimately intended for the benefit of the people of our country and not for the benefit of any stranger".
The court order last month had also slammed the Centre for not giving compensation to workers for delayed payment of work under MNREGA scheme in drought-like situation and said it "does not behove a welfare state" as "social justice has been thrown out of the window".

Following that, RBI said all the banks (excluding RRBs) "are advised to ensure implementation of our guidelines on Relief Measures by banks in areas affected by Natural Calamities contained in our Master Circular dated July 1, 2015".
As per the guidelines, the banks' contribution in providing relief relates to rescheduling of existing loans and sanctioning of fresh loans as per the emerging requirements of the borrowers.
It says that banks need to have some institutional framework in place to deal with the situation and they may also like to take some other facilitating measures like reducing/waiving their penal charges.

"The precise details in regard to the provision of credit assistance by the commercial banks will depend on the requirements of the situation, their own operational capabilities and the actual needs of the borrowers," it said.

In terms of National Disaster Management Framework, there are two funds constituted -- National Disaster Response Fund and State Disaster Response Fund for providing relief in the affected areas.
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As per the guidelines, all short-term loans, including crop loans, except those which are overdue at the time of occurrence of natural calamity, are eligible for restructuring.
The principal amount as well as interest due for repayment in the year of occurrence of natural calamity may be converted into term loan.
Also, the existing term loan installments has to be rescheduled keeping in view the repaying capacity of the borrowers and the nature of natural calamity.

"Once the decisions on the rescheduling of loans is taken ...Pending such conversion of short-term loans, banks may grant fresh crop loans to the affected farmers which will be based on the scale of finance for the particular crop and the cultivation area, as per the extant guidelines," said the July 2015 norms.
Under the relief measures, banks can also grant consumption loans up to Rs 10,000 to existing borrowers without any collateral. The limit could also be enhanced.
"Credit should not be denied for want of personal guarantees," said the guidelines which also prescribe relaxation in KYC norms in the affected areas.

It further said that to satisfy customers immediate cash requirements, restoration of the functioning of ATMs at the earliest or making alternate arrangements for providing such facilities should be given due importance. Banks could also put in place arrangements for allowing their customers to access other ATM networks and mobile ATMs.
Also whenever RBI advises the banks to extend rehabilitation assistance to the riot/ disturbance affected persons, the guidelines could broadly be followed by banks for the purpose.
"It should, however, be ensured that only genuine persons, duly identified by the State Administration as having been affected by the riots/ disturbances," the guidelines said.