What changed
RBI issued a circular on December 5, 2005, advising banks in Tamil Nadu to consider increasing the limit of general consumption loans to Rs 5,000 without collateral, with a further discretionary enhancement to Rs 10,000 based on repaying capacity, referencing the Master Circular on natural calamities relief.
What it means for you
Banks should consider implementing higher uncollateralized consumption loan limits for affected individuals in Tamil Nadu, easing access to emergency funds. Lenders should also consider restoring banking services and extending need-based working capital to viable small enterprises, aligning with the state's risk fund framework.
What you must do
- Advise all branches in Tamil Nadu to assess local damage and consider offering consumption loans up to Rs 5,000 without collateral, with branch manager discretion to extend up to Rs 10,000.
- Consider paragraphs 26-30 of the Master Circular for financial assistance to artisans, self-employed, traders, and small industrial units.
- Restore banking services in affected areas expeditiously and acknowledge receipt of this circular.
- Coordinate with state government risk funds for consumption lending as per paragraph 25 of the Master Circular.
Who it affects
All scheduled commercial banks operating in Tamil Nadu, Branches in flood-affected areas of Tamil Nadu, Affected individuals seeking consumption loans, Small enterprises, artisans, self-employed, traders, and tiny/small industrial units
What is the maximum consumption loan amount allowed under this circular?
Banks can provide up to Rs 5,000 without collateral, and branch managers may increase it to Rs 10,000 based on the borrower's repaying capacity.
Does this circular apply to all natural calamities or only Tamil Nadu floods?
It specifically addresses the December 2005 unprecedented rains and floods in Tamil Nadu, referencing the broader Master Circular on natural calamities relief.
Are banks required to provide working capital to affected small enterprises?
Yes, banks should consider need-based fresh working capital to restore normal operations of viable small enterprises affected by the calamity.