Current · Source: Reserve Bank of India · RBI/2005-06/225 · issued 05 Dec 2005 · ~2 min read
Quick answerRBI advises banks to consider raising consumption loans to Rs 5,000 (up to Rs 10,000 at branch manager's discretion) without collateral for Tamil Nadu flood-affected persons, and to consider need-based working capital to small enterprises.
The rule, in the simplest words
Banks in Tamil Nadu should consider giving higher uncollateralized consumption loans to people affected by floods.
These loans can be up to Rs 5,000 without collateral, and up to Rs 10,000 if the branch manager thinks the person can pay it back.
Banks should also consider giving need-based working capital to small enterprises that were affected by the floods.
How it plays out — a real example
A credit & lending officer in Chennai, Mr. Kumar, was approached by a flood-affected family who needed emergency funds to buy food and medicine. Mr. Kumar considered their situation and decided to give them a consumption loan of Rs 5,000 without collateral, as per the RBI guidelines. He also helped them restore their banking services and provided them with information on how to access the state's risk fund framework for further assistance.
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
❓ Common questions
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.
📜 Read the original circular — full text as issued by RBI
RBI/2005-06/225
RPCD. PLFS. BC. No.51 / 05.04.02 / 2005-06
December 5, 2005
The Chairman/Managing Director/Chief Executive Officer
All scheduled commercial banks
Dear Sir,
Guidelines for relief measures by banks in areas affected by unprecedented rains and floods in Tamil Nadu
As you are aware, the State of Tamil
Nadu has been affected by unprecedented rains and floods, resulting in heavy
damage to life and property. In this connection we invite your attention to
our Master
Circular RPCD.No.PS.BC.6 /05.04.02/ 2005-06 dated July 1,2005
on Guidelines for relief measures by banks in areas affected by natural calamities.
You may accordingly advise your branches in the State to asses the situation
and take immediate measures to provide relief to the affected people. In particular,
we draw your attention to paragraphs 26 to 30 of the said circular regarding
financial assistance to artisan, self-employed, traders, tiny and small scale
industrial units affected by the unprecedented calamity.
2. In terms of paragraph 25 of the above circular, banks may extend general consumption loans upto Rs.1000 to eligible persons in the areas affected by
natural calamity in the states where the state governments have constituted risk funds for such lendings by commercial banks.
In view of the situation prevailing in the state of
Tamil Nadu, banks may consider increasing the limit of consumption loan to be provided to the affected persons in the state upto Rs. 5,000 without any collateral. This limit may be enhanced to Rs.10,000 at the
discretion of the branch manager, depending on the repaying capacity of the borrower.
3. Banks may also consider provision of financial assistance for the purpose of restoring normal working of the affected small enterprises and also sanctioning need-based fresh working capital to those units,
keeping in view the viability of the proposals.
4. Banks are, therefore, requested to take immediate action in this regard and advise their controlling offices/ branches to provide appropriate relief to the affected persons.
5. Banks are also requested to take necessary action to expeditiously restore banking services in the affected areas.
6. Please acknowledge receipt.
Yours faithfully,
( G. Srinivasan )
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2005-06/225 · issued 05 Dec 2005. The plain-English explanation above is BankPulse’s own independent summary.
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.
📜 Compliance
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.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Branch Manager at a bank this circular applies to (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), your first concrete step on “Relief measures for Tamil Nadu flood victims” is: “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.” (RBI issued this 05 Dec 2005).
Circular: RBI/2005-06/225 -- Relief measures for Tamil Nadu flood victims
Issued: 05 Dec 2005
Action required: 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.
Action required: Consider paragraphs 26-30 of the Master Circular for financial assistance to artisans, self-employed, traders, and small industrial units.
Action required: Restore banking services in affected areas expeditiously and acknowledge receipt of this circular.
Action required: Coordinate with state government risk funds for consumption lending as per paragraph 25 of the Master Circular.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=2653&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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