RBI/FIDD/2018-19/65
Master Direction FIDD.CO.FSD.BC No.10/05.10.001/2018-19
October
17, 2018
The Chairman
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.
Yours faithfully,
(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.
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, 2018.
(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 Regional Rural Bank (RRB) licensed to
operate in India by Reserve Bank of India.
CHAPTER
II
BACKGROUND
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).
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 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.
3.4 Scope
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.
CHAPTER
IV
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.
4.2.1.1 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.
4.2.1.2 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.
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 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
5.2.1.1 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.
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
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.
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 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.
5.2.1.4 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.
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 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.
CHAPTER
VII
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.
Appendix
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
|