Master Direction – Reserve Bank of India (Relief Measures by banks in areas affected by Natural Calamities) Directions 2017
UR
- Applies toAll regulated entities
- StatusIn force
- ImportanceMUST READ
- IssuedJul 05, 2017
- Amendmentsnone tracked
- Length41 points in 3 sections · 4 min read
The four dates on this rule
- PublishedJul 05, 2017The day RBI put this document out.
- Starts to applyNot statedNot stated separately in this document. Read the rule itself before you assume a start date.
- Time to get readyNot statedCannot be worked out until the day it starts to apply is known.
- Last date to actNot statedNo date to act by was found in this document. Other dates may sit inside single paragraphs.
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Numbers to remember
| 2 years | For crop loss between 33% and 50%, banks may extend repayment up to 2 years. RBI Para 4.1.2 |
| 5 years | If crop loss is 50% or more, banks may extend repayment up to 5 years. RBI Para 4.1.2 |
| one year | Every restructured loan account gets a moratorium of at least one year. RBI Para 4.1.3 |
| ₹10,000 | Banks must give existing borrowers a consumption loan up to ₹10,000 with no collateral. RBI Para 5.1.3 |
| ₹50,000, | This small account's balance must stay under ₹50,000, or the relief amount if that is higher. RBI Para 6.1 |
| ₹1,00,000, | Total credit into that account in a year must stay under ₹1,00,000, or the relief amount if higher. RBI Para 6.1 |
What it says
Must know
1. Starts when RBI posts it
These rules start the day RBI puts them on its own website.
2. Applies to all commercial banks
This covers every scheduled commercial bank, including small finance banks, but not regional rural banks.
3. Board must approve a plan
Every bank's own Board must approve a natural-calamity action plan ahead of time.
4. Zonal managers get discretion
Zonal managers must get power to decide relief steps without asking head office every time.
5. 33% crop loss triggers relief
Banks reschedule loans only once assessed crop loss reaches 33% or more.
6. Short crop loans get restructured
Every short-term crop loan can be restructured, except a loan that was already overdue.
7. Mid loss gets 2-year term
For crop loss between 33% and 50%, banks may extend repayment up to 2 years.
BankPulse example. A farmer's crop loss is 40%, so it falls in the 33%-50% band. RBI's own words allow a maximum of 2 years, and 1 year of that is the moratorium already built in -- so the farmer has just 1 year left to actually repay.
8. Heavy loss gets 5-year term
If crop loss is 50% or more, banks may extend repayment up to 5 years.
9. At least one year's moratorium
Every restructured loan account gets a moratorium of at least one year.
10. No extra collateral demanded
Banks must not ask for extra collateral security on these restructured loans.
11. One-year extension, crop only damaged
If only the crop is damaged, banks may reschedule the instalment and extend the loan by one year.
12. Damaged-asset loans capped 5 years
When a borrower's own assets are damaged, the fresh repayment period should not exceed 5 years.
13. Restructured part stays non-NPA
The restructured part of a loan is treated as current, not marked as a bad loan.
14. Higher provisions required
Banks must set aside higher provisions for these restructured standard loans.
15. New finance counts as standard
Any new money lent to the borrower is booked as a "standard asset".
16. Repeat disasters don't count twice
A loan hit by natural calamity a second time is not treated as a second restructuring.
17. Don't wait for insurance claim
Banks should restructure and lend fresh money without waiting for the insurance claim to arrive.
18. ₹10,000 consumption loan, no collateral
Banks must give existing borrowers a consumption loan up to ₹10,000 with no collateral.
19. No guarantee, still gets credit
Banks must not refuse credit just because a personal guarantee is missing.
20. Security short? Loan still given
A bank must give the fresh loan even if the security offered is worth less than the loan.
21. No third-party guarantee needed
Banks must not demand a third-party guarantee just to convert a crop loan to a term loan.
22. Margin can be waived
Banks may waive margin, or count a state government subsidy as the margin instead.
23. No penal interest, current dues
Banks must not charge penal interest on current dues that are in default.
24. Small account: photo and thumb
Banks can open a small account for a disaster victim using just a photo and thumb mark.
25. Balance capped at ₹50,000
This small account's balance must stay under ₹50,000, or the relief amount if that is higher.
26. Yearly credit capped at ₹1,00,000
Total credit into that account in a year must stay under ₹1,00,000, or the relief amount if higher.
27. Banks may waive fees, penalties
Banks may waive ATM fees, overdraft charges and late fees for the affected customers.
28. Credit card dues become EMIs
Credit card holders may convert their dues into EMIs repayable over 1-2 years.
29. Same rules apply to riots
When RBI says so, these same relief rules also cover people hurt by riots or disturbances.
Do it
1. Other loans also get rescheduled
SLBC or DCC can decide to reschedule loans to rural artisans, traders and small industry too.
2. Restructure within three months
Banks must finish restructuring within three months of the calamity to keep the easier asset rules.
3. Adjust insurance money into loan
Banks must adjust any insurance payout they receive against the restructured loan account.
4. Bank can raise that limit
A bank may raise that ₹10,000 consumption-loan limit at its own discretion.
5. Waive earlier penal interest too
Banks should also consider waiving any penal interest already charged on the rescheduled loan.
6. RBI approval after 30 days
A bank needs RBI's own approval to keep running a temporary branch beyond 30 days.
7. Collector can call DCC meeting
After riots, the District Collector may ask the lead bank to call a DCC meeting.
Background
1. Two funds pay for relief
Disaster relief money in India comes from one central fund and one state fund.
2. 12 disaster types recognised
The relief framework behind this rule recognises 12 kinds of natural disaster, from cyclone to cold wave.
3. Banks reschedule and lend fresh
Banks help disaster victims mainly by rescheduling old loans and by lending fresh money.
4. Fresh credit depends on viability
Before giving fresh credit for rehabilitation, banks must check that the venture is viable.
5. PMFBY is the insurance scheme
Crop insurance today runs through the PMFBY scheme, which replaced the older NAIS and MNAIS schemes.