Reserve Bank of India
Master Direction FIDD.CO.FSD.BC No.10/05.10.001/2018-19
October 17, 2018
All Regional Rural Banks
Madam / Sir,
Master Direction – Reserve Bank of India (Relief Measures by Banks in Areas affected by Natural Calamities) Directions 2018 – RRBs
The Master Direction on relief measures by banks in areas affected by Natural Calamities was first issued to Scheduled Commercial Banks in 2016.
2. The guidelines applicable to Regional Rural Banks for extending relief measures in areas affected by natural calamities are now issued in the form of Master Direction.
3. This Master Direction consolidates all the guidelines issued on the subject till date. The list of circulars compiled into this Master Direction is given in the Appendix.
Please acknowledge receipt.
(G. P. Borah)
Chief General Manager-in-Charge
Master Direction – Reserve Bank of India (Relief Measures by Banks in Areas Affected by Natural Calamities) Directions, 2018
In exercise of the powers conferred under Sections 21 and 35A of the Banking Regulation Act, 1949, the Reserve Bank of India being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified.
1.1 Short Title and Commencement
(a) These Directions shall be called the Reserve Bank of India (Relief Measures by Banks in Areas Affected by Natural Calamities) Directions, 2018.
(b) These Directions shall come into effect on the day they are placed on the official website of the Reserve Bank of India.
The provisions of these Directions shall apply to every Regional Rural Bank (RRB) licensed to operate in India by Reserve Bank of India.
2.1 Periodic but frequent occurrence of natural calamity takes a heavy toll on human life and cause wide spread damage to economic pursuits in one or the other part of the country. The devastation caused by natural calamities calls for massive rehabilitation effort from all agencies. The Central, State and local authorities draw up programmes on economic rehabilitation for the people affected by natural calamities. The developmental role assigned to the Regional Rural Banks (RRBs) warrant their active support in reviving the economic activities of those affected by the occurrence of a natural calamity.
2.2 In terms of the National Disaster Management Framework, there are two funds constituted viz. National Disaster Response Fund (NDRF) and State Disaster Response Fund (SDRF) for providing relief in the affected areas. The NDRF framework currently recognizes twelve types of natural calamities viz. cyclone, drought, earthquake, fire, flood, tsunami, hailstorm, landslide, avalanche, cloud burst, pest attack and cold wave/frost. The Ministry of Agriculture is the nodal point for four of the calamities i.e. drought, hailstorms, pest attack and cold wave/frost and for the remaining eight, the Ministry of Home Affairs is the nodal ministry to make the necessary administrative arrangements. A slew of measures for relief are undertaken by the Sovereign (Central/State Government) from time to time to provide relief to the affected people including, inter alia, provision for input subsidies and financial assistance to farmers including small and marginal farmers.
2.3 The Regional Rural Banks, as members of the State Level Bankers Committee (SLBC) play a key role in providing relief measure through rescheduling existing loans and sanctioning fresh loans as per the emerging requirement of the borrowers. To enable banks to take uniform and concerted action expeditiously, these directions are issued covering four aspects viz. Institutional Framework (Chapter III), Restructuring of Existing Loans (Chapter IV), Providing Fresh Loans (Chapter V) and Other Ancillary Relief Measures (Chapter VI).
3.1 Establishing Policy/Procedures for dealing with Natural Calamities
The area, time of occurrence and intensity of the natural calamity cannot be anticipated. It is, therefore, imperative that banks have a blueprint of action duly approved by the Board of Directors for such eventualities so that the required relief and assistance are provided with utmost speed and without any loss of time. Further, all branches of the bank and their regional offices shall be familiar with these standing instructions. The standing instructions shall immediately come to force after the district/state authorities put in place the requisite declaration. It is essential that these instructions shall also be made available to the State Government authorities and all the District Collectors so that all concerned are aware about the action that shall be taken by the concerned authorities in the affected area.
3.2 Discretionary Powers to Branch/Regional Office of banks
The Branch/Regional Office Managers of banks may be vested with certain discretionary powers to avoid the need to seek fresh approval from their Head Office regarding the line of action decided by the District Consultative Committee/State Level Bankers’ Committee. Some of the areas, among others where such discretionary powers are vital may be the adoption of scale of finance, need based restructuring of loans, extension of loan period, margin, security, sanction of new loan keeping in view the total liability of the borrower arising out of the old loan where the asset financed was damaged or lost as a result of the natural calamity and the new loan financed for creation/repair of such asset(s).
3.3 Meeting of State Level Bankers’ Committee (SLBC)/District Consultative Committee (DCC)
3.3.1 In the event of occurrence of a natural calamity which covers a larger part of a State, the State Level Bankers’ Committee convener bank shall convene a special SLBC meeting immediately. The committee, in collaboration with the State Government authorities shall evolve a coordinated action plan for implementing the relief programme. If the calamity has affected only a small part of the state/few districts, the convener of the District Consultative Committee of the affected district(s) shall convene a meeting immediately. In the special SLBC/DCC meeting, the position of the affected areas may be assessed so as to ensure speedy formulation and implementation of suitable relief measures.
3.3.2 In the areas where the calamity is severe, the relief measure(s) implemented shall be reviewed periodically through a specially constituted Task Force/Sub-Committee by way of weekly/fortnightly meetings as decided by the SLBC/DCC.
The Master Directions shall be applicable to farmers/loanees who have been affected by a natural calamity as declared by the State Govt. /Authorities and are willing to avail the benefits under the guidelines.
3.5 Declaration of Natural Calamity
3.5.1 It is recognised that declaration of a natural calamity is in the domain of the Central / State Government. The inputs received from the State Governments revealed that there is no uniform procedure being followed for declaration of a natural calamity and issue of declarations/certificates. These declarations/certificates are called by different names such as Annewari, Paisewari, Girdawari, etc. in different States. Nevertheless, the common thread to extend relief measure towards agricultural loans including rescheduling of loans by banks, is that the crop loss assessed should be 33% or more. For assessing this loss, while some States are conducting crop cutting experiments to determine the loss in crop yield, some others are relying on the eye estimates/visual impressions.
3.5.2 In case of extreme situations such as wide-spread floods, when it is largely evident that most of the standing crops have been damaged and/or land and other assets have suffered a wide-spread damage, the matter shall be deliberated by State Government/District Authorities in a specially convened SLBC/DCC meeting where the concerned Government functionary/District Collector shall explain the reasons for not estimating ‘Annewari’ (percentage of crop loss – by whatever name called) through crop cutting experiments and that the decision to provide relief for the affected populace needs to be taken based on the eye estimate/visual impressions.
3.5.3 In both the cases, however, SLBC/DCC shall satisfy themselves fully that the crop loss has been 33% or more before acting on these pronouncements.
RESTRUCTURING OF EXISTING LOANS
In the event of a natural calamity, the repaying capacity of the people gets severely affected due to the disruption of their economic activities and loss of economic assets. Therefore, relief in loan repayment by restructuring the existing loan may become necessary.
4.1. Agriculture Loans: Short-term Production Credit (Crop Loans)
4.1.1 All short-term loans, except those which are overdue at the time of occurrence of natural calamity, shall be eligible for restructuring. The principal amount of the short-term loan as well as interest due for repayment in the year of occurrence of the natural calamity may be converted into term loan.
4.1.2 The repayment period of the restructured loan may vary depending on the severity of the calamity, the impact on loss of economic assets and distress it caused. A maximum repayment period of up to two years (including the moratorium period of one year) shall be allowed if the loss is between 33% and 50%. If the crop loss is 50% or more, repayment period may be extended upto a maximum of five years (including the one year moratorium period).
4.1.3 In all restructured loan accounts, moratorium period of at least one year shall be considered. Banks may not insist on additional collateral security for such restructured loans.
4.2 Agriculture Loans: Long term (Investment) Credit
4.2.1 The existing term loan instalments shall be rescheduled keeping in view the repaying capacity of the borrower and the nature of natural calamity viz.
22.214.171.124 In a natural calamity where only crop for that year is damaged and productive assets are not damaged, banks shall reschedule the payment of instalment during the year of natural calamity and extend the loan period by one year. Under this arrangement the instalments defaulted wilfully in earlier years will not be eligible for rescheduling. The banks may also have to postpone payment of interest by borrowers.
126.96.36.199 In a natural calamity where the productive assets are partially or totally damaged and borrowers are in need of a new loan, the rescheduling by way of extension of loan period shall be determined on the basis of overall repaying capacity of the borrower vis-a-vis total liability (old term loan, restructured crop loan, if any and the fresh crop/term loan being given) less the subsidies received from the Government agencies, compensation available under the insurance schemes etc. While the total repayment period for the restructured/fresh term loan may differ on case-to-case basis, generally it shall not exceed a period of 5 years.
4.3 Other Loans
4.3.1 Depending on the severity of the calamity, SLBC/DCC shall take a view as to whether a general rescheduling of all other loans (i.e. besides the agriculture loans) such as loans granted for allied activities, loans to rural artisans, traders, micro/small industrial units or in case of extreme situations, medium enterprises are required. If such a decision is taken, while recovery of all the loans be postponed by the specified period, banks may assess the requirement of the individual borrowers in each case and depending on the nature of his/her account, repayment capacity and the need for fresh loans, appropriate decisions shall be taken by the individual banks
4.3.2 The primary consideration for extending credit to any unit for its rehabilitation shall be based on the viability of the venture as assessed by the bank.
4.4 Asset Classification
The asset classification status of the restructured loans shall be as under:
4.4.1 The restructured portion of the short term as well as long-term loans may be treated as current dues and need not be classified as NPA. The asset classification of these term loans would thereafter be governed by the revised terms and conditions. Nevertheless, banks are required to make higher provisions for such restructured standard advances as prescribed by Department of Banking Regulation1 from time to time. Further, interest income from such restructured accounts classified as ‘standard assets’ will be recognized as per the norms prescribed in the DBR guidelines.
4.4.2. The asset classification for the remaining dues, which does not form a part of the restructured portion, will continue to be governed by the original terms and conditions of its sanction. Consequently, the dues from the borrower shall be classified by the lending bank under different asset classification categories viz. standard, sub-standard, doubtful and loss.
4.4.3. Additional finance, if any, shall be treated as “standard asset” and its future asset classification will be governed by the terms and conditions of its sanction.
4.4.4. With the objective to ensure that banks are proactive in extending relief to the affected persons, the benefit of asset classification of the restructured accounts as on the date of natural calamity will be available only if the restructuring is completed within a period of three months from the date of natural calamity. In the event of extreme calamity, when the SLBC/DCC is of the view that this period will not be sufficient for the branches to reschedule all the affected loans, it shall approach NABARD giving the reasons for seeking extension. These requests will be considered on the basis of merit of each case.
4.4.5 The accounts that are restructured for the second time or more on account of recurrence of natural calamities shall retain the same asset classification category on restructuring. Accordingly, for a restructured standard asset, the subsequent restructuring necessitated on account of natural calamity shall not be treated as second restructuring, i.e., the standard asset classification shall be maintained. However, all other restructuring norms shall apply.
4.5 Utilization of Insurance Proceeds
4.5.1 While the above measures relating to rescheduling of loans are intended to provide relief to the farmers, the insurance proceeds should, ideally, compensate the losses. In terms of orders issued by the Ministry of Agriculture, Department of Agriculture, Cooperation and Farmers Welfare, the Pradhan Mantri Fasal Bima Yojana (PMFBY) has replaced the existing schemes of National Agricultural Insurance Scheme (NAIS) & Modified National Agricultural Insurance Scheme (MNAIS) with effect from Kharif 2016. Under the Prime Minister Fasal Bima Yojana (PMFBY), all Seasonal Agricultural Operations (SAO) loans for notified crops in notified areas are to be compulsorily provided insurance cover for all stages of the crop cycle including post-harvest risks in specified instances2. Farmers’ details are required to be entered by banks in the unified portal for crop insurance which is available at www.agri-insurance.gov.in in order to facilitate assessment of coverage of crops insured, premiums deducted, etc.
4.5.2 While restructuring the loans in areas affected by a natural calamity, banks shall also take into account the insurance proceeds, if any, receivable from the Insurance Company. The insurance proceeds shall be adjusted to the ‘restructured accounts’ in cases where fresh loan have been granted to the borrower. However, banks shall act with empathy and consider restructuring and granting fresh loans without waiting for the receipt of insurance claim in cases where there is reasonable certainty of receiving the claim.
PROVIDING FRESH LOANS
5.1 Sanctioning of Fresh Loans
5.1.1 Once the decision to reschedule loans is taken by SLBC/DCC, pending conversion of short-term loans, banks shall grant fresh crop loan to the affected farmers based on the scale of finance of the crop and the cultivation area as per the extant guidelines3.
5.1.2 The bank assistance in agriculture and allied activities (poultry, fishery, animal husbandry, etc.) may also be needed for long term loans for a variety of purposes such as repair of existing economic asset(s) and/or acquisition of new asset(s). Similarly, rural artisans, self-employed persons, micro and small industrial units, etc. in the areas affected by a natural calamity may require fresh credit to sustain their livelihood. Banks shall assess the need and decide on the quantum of loans to be granted to the affected borrowers taking into consideration, amongst others, the credit requirement and the due procedure for sanctioning fresh loans.
5.1.3. Banks shall also grant consumption loan up to ₹ 10,000/- to existing borrowers without any collateral. The limit may, however, be enhanced beyond ₹ 10,000/- at the bank’s discretion.
5.2 Terms and Conditions
5.2.1 Guarantee, Security and Margin
188.8.131.52 Credit shall not be denied for want of a personal guarantee alone. Where the bank’s existing security has been eroded because of damage or destruction by floods, assistance will not be denied merely for want of additional fresh security. The fresh loan shall be granted even if the value of security (existing as well as the asset to be acquired from the new loan) is less than the loan amount. For fresh loans, banks shall take a sympathetic view.
184.108.40.206 Where the crop loan (which has been converted into term loan) was earlier sanctioned against personal security/hypothecation of crop and the borrower is not able to offer charge/mortgage of land as security for the converted loan, she/he shall not be denied conversion facility merely on the ground of his/her inability to furnish land as security. If the borrower has already availed a term loan against mortgage/charge on land, the bank shall be content with a second charge for the converted term loan. Banks shall not insist on third party guarantee for providing conversion facility.
220.127.116.11 Where land is taken as security, in the absence of original title record, a certificate issued by the Revenue Department officials shall be accepted for financing to farmers who have lost proof of their title such as title deed or registration certificate issued to registered share-croppers. In the areas covered by the Sixth Schedule of the Constitution, whereby the land is owned by the community, certificate issued by community authorities may be accepted.
18.104.22.168 Margin requirements may be waived or the grant/subsidy given by the concerned State Government shall be considered as margin.
5.3 Rate of Interest
5.3.1 The rate of interest shall be in accordance with the Master Directions – Reserve Bank of India (Interest Rate on Loans and Advances) Directions. Within the areas of their discretion, however, banks shall take a sympathetic view of the difficulties of the borrowers and extend a concessional treatment to calamity-affected people. In respect of default in current dues, no penal interest shall be charged. The banks shall also suitably defer the compounding of interest charges. Banks shall not levy any penal interest and consider waiving penal interest, if any, already charged in regard to the loans converted/rescheduled. Depending on the nature and severity of the natural calamity, the SLBC/ DCC shall take a view on the interest rate concession that could be extended to borrowers so that there is uniformity in approach among banks in providing relief.
5.3.2 As notified by the Government of India4 from time to time, to provide relief to farmers availing short term crop loans and affected by a natural calamity, an interest subvention of 2 percent per annum will be made available to banks for the first year on the restructured loan amount. Such restructured loans shall attract normal rates of interest from the second year onwards.
OTHER ANCILLARY MEASURES
6.1 Relaxation on Know Your Customer (KYC) Norms
It needs to be recognized that many persons displaced or adversely affected by a major calamity may not have access to their identification and personal records. In such cases a basic saving bank deposit account on the basis of photograph along with signature or thumb impression rendered in front of the bank official shall be opened. The above instruction shall be applicable to cases where the balance in the account does not exceed ₹ 50,000/- or the amount of relief granted (if higher) and the total credit in the account does not exceed ₹ 1,00,000/- or the amount of relief granted, (if higher) in a year.
6.2 Providing access to Banking Service
6.2.1 Banks may operate its natural calamity affected branches from temporary premises under advice to the concerned Regional Office of RBI/NABARD. For continuing the temporary premise beyond 30 days, banks may obtain specific approval from the appropriate authorities. Banks may also make arrangements to render banking services in the affected areas by setting up satellite offices, extension counters or mobile banking facilities etc. under intimation to RBI/NABARD.
6.2.2 To meet the immediate cash requirements of the affected people, due importance may be given towards restoring the ATMs or other alternate arrangements shall be provided to avail such facilities.
6.2.3 Other measures that banks may initiate at their discretion to alleviate the condition of the affected people could be waiving ATM fees, increasing ATM withdrawal limits; waiving of fees towards overdraft/early withdrawal penalty on time deposits /late fee for credit card/other loan instalment payments etc. and giving option to credit card holders to convert their outstanding balance to EMIs repayable in 1-2 years. Besides, all charges debited to the farm loan account other than the regular interest may be waived considering the hardship caused to the affected people.
RIOTS AND DISTURBANCES: APPLICABILITY OF THE GUIDELINES
Applicability of the guidelines in case of riots and disturbances
7.1 Whenever RBI/NABARD advises the banks to extend rehabilitation assistance to the riot/ disturbance affected persons, the aforesaid guidelines shall broadly be followed by banks for the purpose. It shall, however, be ensured that only genuine persons, duly identified by the State Administration as having been affected by the riots/ disturbances, are provided assistance as per the guidelines. In the event of large scale riots where most part of the State/Area is affected and the State Administration is not in a position to identify the riot/disturbance affected persons and subject to SLBC’s specific decision, the onus of identifying ‘genuine persons’ will rest with banks.
7.2. The issuance of advice to the banks by RBI/NABARD on receipt of request/ information from State Government and thereafter issue of instructions by banks to their branches generally results in delay in extending the assistance to riot-affected people. With a view to ensure quick relief to the affected people, it has been decided that the District Collector, on occurrence of the riot/ disturbance, may ask the Lead Bank Officer to convene a meeting of the DCC, if necessary and submit a report to the DCC on the extent of damage caused to life and property in the area affected by riot/disturbance. If the DCC is satisfied that there has been extensive loss to life and property on account of the riot/ disturbance, the relief as per the above guidelines shall be extended to the people affected by the riot/ disturbance. In cases where there are no District Consultative Committees, the District Collector may request the convener of the State Level Bankers’ Committee of the State to convene a meeting of the bankers to consider extension of relief to the affected persons. The report submitted by the District Collector and the decision thereon of SLBC/DCC shall be recorded and shall form a part of the minutes of the meeting. A copy of the proceedings of the meeting shall be forwarded to the concerned Regional Office of the Reserve Bank of India.
Master Direction – Reserve Bank of India (Relief Measures by Banks in Areas Affected by Natural Calamities) Directions, 2018
List of circulars consolidated for the Master Direction
|Sr. No.||Circular No.||Date||Subject|
|1.||RPCD.No.PS.BC.6/PS.126-84||2.8.1984||Revised guidelines for relief measures by banks in areas affected by natural calamities|
|2.||RPCD.No.PLFS.BC.38/PS.126-91/92||21.9.1991||Banks’ assistance to persons affected by riots/ communal disturbances, etc.|
|3.||RPCD.No.PLFS.BC.59/05.04.02/92-93||6.1.1993||Guidelines for Relief Measures by banks in areas affected by natural calamities-(Consumption Loans)|
|4.||RPCD.No.PLFS.BC.128/05.04.02/97-98||20.6.1998||Relief measures to persons affected by natural calamities – Agricultural advances|
|5.||RPCD.PLFS.BC.No.42/05.02.02/2005-06||1.10.2005||The Advisory Committee on Flow of credit to Agriculture and related activities from the Banking System|
|6.||FIDD No.FSD.BC.12/05.10.001/2015-16||21.8.2015||Guidelines for Relief Measures by Banks in Areas Affected by Natural Calamities|
|7.||FIDD NO.FSD.BC.27/05.10.001/2015-16||30.06.2016||Guidelines for Relief Measures by Banks in Areas Affected by Natural Calamities- Utilization of Insurance Proceeds|
|8.||Master Direction FIDD.CO.FSD.BC No.8/05.10.001/2017-18||03.07.2017||Master Direction – Reserve Bank of India (Relief Measures by banks in areas affected by Natural Calamities) Directions 2017|
|9.||NABARD Ref.No.NB.DoR.ST/1790/Policy-A-10/2015-16||26.08.2015||Guidelines for Relief Measures by Banks in Areas Affected by Natural Calamities|
1 Master Circular – Prudential Norms on Income recognition, Asset Classification and Provisioning pertaining to Advances
2 Operational Guidelines – PMFBY issued by Ministry of Agriculture & Farmers’ Welfare
3 Master Circular – Kisan Credit Card Scheme
4 Subject to inclusion in the IS Scheme on short term crop loans