What changed
RBI has issued a circular advising banks to adopt the National Disaster Management Authority (NDMA) guidelines on disaster-resilient construction. Banks must now incorporate these guidelines into their loan policies, procedures, and documentation for new constructions and alterations. The move aims to close critical gaps in ensuring disaster resilience in assets financed by banks.
What it means for you
Banks must now verify that buildings and infrastructure financed through loans are designed to withstand disasters before sanctioning or disbursing funds. This adds a compliance layer to loan appraisal, requiring structural design checks for disaster resilience. Lenders benefit from safer collateral, reducing long-term risk of asset damage. Borrowers may face additional documentation but gain safer structures.
What you must do
- Adopt NDMA guidelines on disaster-resilient construction into your bank's loan policy and procedures.
- Update loan documentation to include clauses ensuring disaster-resistant features are incorporated at the design stage.
- Train loan officers to verify structural designs for disaster resilience before loan sanction or disbursement.
- Apply these norms to all new constructions and any additions, modifications, or extensions of financed properties.
Who it affects
All scheduled commercial banks (excluding RRBs), Loan officers and credit appraisal teams, Borrowers seeking construction or home loans, Real estate and infrastructure developers
Do these guidelines apply to existing loans?
The circular advises banks to apply the NDMA guidelines to new constructions as well as additions, modifications, extensions, or alterations of houses financed by them. It does not explicitly require retrofitting of existing structures.
What happens if a borrower fails to incorporate disaster-resistant features?
The circular does not specify penalties. However, banks are advised to ensure these features are incorporated before loan sanction or disbursement, so non-compliance could delay or prevent loan approval.
Are RRBs exempt from this requirement?
Yes, the circular is addressed to all scheduled commercial banks excluding Regional Rural Banks (RRBs).