RBI/FIDD/2017-2018/55
Master Direction FIDD.CO.FSD.BC No.8/05.10.001/2017-18
July
03, 2017
The Chairman/Managing
Director/Chief Executive Officer
All scheduled commercial banks
(including Small Finance Banks and excluding Regional Rural Banks)
Madam / Sir,
Master Direction – Reserve Bank
of India (Relief Measures by banks in areas affected by Natural Calamities)
Directions 2017
Please refer to our ‘Master Direction
FIDD.No.FSD.BC.2/05.10.001/2016-17 dated July 1, 2016’ incorporating
guidelines issued to banks in regard to matters relating to relief measures
to be provided in areas affected by natural calamity.
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.
Yours faithfully,
(Ajay Kumar Misra)
Chief General Manager
Master
Direction - Reserve Bank of India (Relief Measures by Banks in Areas
Affected by Natural Calamities) Directions, 2017
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.
CHAPTER
I
PRELIMINARY
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, 2017.
(b) These Directions shall come
into effect on the day they are placed on the official website of the
Reserve Bank of India.
1.2. Applicability
The provisions of these
Directions shall apply to every Scheduled Commercial Bank {including Small
Finance Banks (SFBs) and excluding Regional Rural Banks(RRBs)} licensed to
operate in India by Reserve Bank of India.
CHAPTER
II
BACKGROUND
2.1 Periodical 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 programmes on economic rehabilitation for the people
affected by natural calamities. The developmental role assigned to the
commercial banks including Small Finance Banks 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. This framework currently recognizes 12 types of natural
calamities viz. cyclone, drought, earthquake, fire, flood, tsunami,
hailstorm, landslide, avalanche, cloud burst, pest attack and cold
wave/frost. Out of these 12, for 4 calamities i.e. drought, hailstorms,
pest attack and cold wave/frost, the Ministry of Agriculture is the nodal
point and for the remaining 8, 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, financial assistance
to farmers including small and marginal farmers.
2.3 The role of the scheduled commercial banks
including Small Finance Banks (SFBs) is to provide 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).
CHAPTER
III
INSTITUTIONAL FRAMEWORK
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
is provided with utmost speed and without any loss of time. Further, all
Divisional/Zonal Offices and branches of Scheduled Commercial/Small Finance
banks should be familiar with these standing instructions. These standing
instructions will immediately come to force after the district/state
authorities put in place the requisite declaration. It is essential that
these instructions should also be made available to the State Government
authorities and all the District Collectors so that all concerned are aware
about the action that should be taken by the concerned authorities in the
affected area.
3.2 Discretionary Powers to
Divisional / Zonal Manager of banks
The Divisional/Zonal Managers of
scheduled commercial/SF banks must be vested with certain discretionary
powers to avoid the need to seek fresh approval from their Central 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,
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 is damaged or lost due to 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 an
occurrence of a natural calamity which covers a larger part of a State, the
State Level Bankers’ Committee convener bank should convene a meeting
immediately. The committee, in collaboration with the State Government
authorities should 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) should 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 should be reviewed
periodically through a specially constituted Task Force/Sub-Committee by
way of weekly/fortnightly meetings as decided by the SLBC/DCC.
3.4 Declaration of Natural
Calamity
3.4.1 It is recognised that
declaration of a natural calamity is in the domain of the Sovereign
(Central / State Governments). The inputs received from the State
Governments reveal that there are no uniform procedures being followed for
declaration of 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 measures including reschedulement 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.
3.4.2 In case of extreme
situations such as wide-spread floods, etc. when it is largely clear that
most of the standing crops have been damaged and/or land and other assets
have suffered a wide-spread damage, the matter be deliberated by State
Government/District Authorities in the especially convened SLBC/DCC
meetings where the concerned Government functionary/District Collector may
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.
3.4.3 In both the cases,
however, DCCs/SLBC have to satisfy themselves fully that the crop loss has
been 33% or more before acting on these pronouncements.
CHAPTER
IV
RESTRUCTURUNG 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, should 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 2 years (including the moratorium period of 1
year) should 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 5
years (including the 1 year moratorium period).
4.1.3 In all restructured loan
accounts, moratorium period of at
least one year should be considered.
Banks should also 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
installments should be rescheduled keeping in view the repaying capacity of
the borrower and the nature of natural calamity viz.
4.2.1.1 Natural Calamities where
only crop for that year is damaged and productive assets are not damaged.
4.2.1.2 Natural Calamities where
the productive assets are partially or totally damaged and borrowers are in
need of a new loan.
4.2.1.3 In regard to natural
calamity under category (4.2.1.1)
above, the banks may reschedule the payment of installment during the year
of natural calamity and extend the loan period by one year. Under this
arrangement the installments defaulted wilfully in earlier years will not
be eligible for rescheduling. The banks may also have to postpone payment
of interest by borrowers.
4.2.1.4 In regard to category (4.2.1.2) i.e. where the
borrower’s assets are partially/totally damaged, the rescheduling by way of
extension of loan period may be determined on the basis of overall repaying
capacity of the borrower vis-a-vis his 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 will differ on case-to-case
basis, generally it should not exceed a period of 5 years.
4.3 Other Loans
4.3.1 A view needs to be taken
by SLBC/DCC depending on the severity of the calamity as to whether a
general reschedulement of all other loans (i.e. besides the agriculture
loans as indicated above) such as loans granted for allied activities and
loans given to rural artisans, traders, micro/small industrial units or in
case of extreme situations, medium enterprises is required. If such a
decision is taken, while recovery of all the loans be postponed by the
specified period, banks will have to assess the requirement of the
individual borrowers in each such case and depending on the nature of his
account, repayment capacity and the need for the fresh loans, appropriate
decisions shall be taken by the individual banks
4.3.2 The primary consideration
before the banks in extending credit to any unit for its rehabilitation
should be based on the viability of the venture after the rehabilitation
programme is implemented.
4.4 Asset Classification
The asset classification status
of the restructured loans will 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.
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
account 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 banks to
reschedule all the affected loans, it should immediately approach the
concerned Regional Office of RBI detailing the reasons for seeking
extension. Such requests will be considered on the 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 should retain the same asset classification category on
restructuring. Accordingly, for a restructured standard asset, the
subsequent restructuring necessitated on account of natural calamity would
not be treated as second restructuring, i.e., the standard asset
classification will be allowed to be maintained. However, all other
restructuring norms will 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 their losses.
In terms of orders issued by the 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 scheme all agriculture loans are
provided insurance cover for all stages of the crop cycle including
post-harvest risks in specified instances. Farmers’ details are required to
be entered by banks in the unified portal for crop insurance which is
available at 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 should also take into
account the insurance proceeds, if any, receivable from the Insurance
Company. They should adjust these proceeds to the ‘restructured accounts’
in cases where they have granted fresh loan to the borrower. However, banks
should 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.
CHAPTER
V
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 people based on
the scale of finance for the crop and the cultivation area, as per the
extant guidelines2.
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 should assess the
need and decide on the quantum of loans to be granted to the affected
borrowers taking into consideration, amongst others, their credit
requirement and the due procedure for sanctioning 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
5.2.1.1 Credit should not be
denied for want of personal guarantees. 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, a sympathetic view will have to be taken.
5.2.1.2 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
should not be denied conversion facility merely on the ground of his/her
inability to furnish land as security. If the borrower has already taken a
term loan against mortgage/charge on land, the bank should be content with
a second charge for the converted term loan. Banks should not insist on
third party guarantee for providing conversion facility.
5.2.1.3 Where land is taken as
security, in the absence of original title record, a certificate issued by the
Revenue Department officials may 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.
5.2.1.4 Margin requirements may
be waived or the grant/subsidy given by the concerned State Government may
be considered as margin.
5.3 Rate of Interest
The rates of interest will be in
accordance with the directives of the Reserve Bank. Within the areas of
their discretion, however, banks are expected to take a sympathetic view of
the difficulties of the borrowers and extend a concessional treatment to
calamity-affected people. In respect of current dues in default, no penal
interest will be charged. The banks should also suitably defer the
compounding of interest charges. Banks may 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
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.
CHAPTER
VI
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 normal identification and personal records. In such
cases a small account based on the photograph and signature or thumb
impression rendered in front of the bank official shall be opened. The
above instructions will 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. For continuing the temporary premise
beyond 30 days, banks may obtain specific approval from the concerned
Regional Office of RBI. 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.
6.2.2 To meet the immediate cash
requirement of the affected people, due importance may be given towards
restoring the ATMs or other alternate arrangements maybe 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
overdraft fees/early withdrawal penalty on time deposits /late fee for
credit card/other loan installment 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 normal interest may be waived considering the hardship caused to
the affected people.
CHAPTER
VII
RIOTS AND DISTURBANCES: APPLICABILITY OF THE GUIDELINES
Applicability of the guidelines
in case of riots and disturbances
7.1 Whenever RBI advises the
banks to extend rehabilitation assistance to the riot/ disturbance affected
persons, the aforesaid guidelines may broadly be followed by banks for the
purpose. It should, 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.
7.2. The issuance of advice to
the banks by Reserve Bank of India 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 ensuring quick relief to the affected
persons, it has been decided that the District Collector, on occurrence of
the riots/ disturbances, 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
riots/disturbances. If the DCC is satisfied that there has been extensive
loss to life and property on account of the riots/ disturbances, the relief
as per the above guidelines may be extended to the people affected by the
riots/ disturbances. In certain 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 Collector and the decision thereon of DCC/ SLBC may be
recorded and should form a part of the minutes of the meeting. A copy of
the proceedings of the meeting may be forwarded to the concerned Regional
Office of the Reserve Bank of India.
Appendix
Master
Direction - Reserve Bank of India (Relief Measures by Banks in Areas
Affected by Natural Calamities) Directions, 2017
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
|
1 DBR’s Master
Directions on Prudential Guidelines on Income Recognition, Asset
Classification and Provisioning
2 Master circular on
Kisan Credit card Scheme available @ rbi.org.in
|