CFA submitted comments to the Chief General Manager, Credit Risk Group, Department of Regulation, Reserve Bank of India, on the Draft Directions on Relief Measures in Areas Affected by Natural Calamities dated January 27, 2026.
We submit these comments in response to the draft Directions on ‘Relief Measures in areas affected by Natural Calamities’ issued pursuant to the Statement on Developmental and Regulatory Policies dated June 8, 2023, through which the Reserve Bank of India has proposed to rationalise and harmonise the extant prudential norms governing the resolution of loan exposures affected by natural calamities and other external events and other external events such as riots or disturbances that disrupt economic activity.
While the attempt to bring regulatory uniformity across Regulated Entities and to clarify scope, coverage, and procedural timelines is welcome, we wish to place on record certain critical concerns regarding the exclusionary nature of the eligibility criteria, the limited ambit of permissible resolution arrangements, and the absence of institutional mechanisms to address borrower grievances and wider public demands for loan relief in the aftermath of increasingly frequent climate-related disasters.
The draft framework, issued for public comments, seeks to consolidate disparate regulatory instructions applicable to different Regulated Entities (REs) comprising – commercial banks, small finance banks, local area banks, urban cooperative banks, rural cooperative banks, regional rural banks, non banking financial companies and All India Financial institutions -, replacing earlier circulars including the 2018 Master Directions on relief measures in calamity-affected areas.
The announcement of these measures comes on the heels of judicial and civil society push. Substantive loan relief has been underscored by judicial intervention as well as in demands raised by civil society. In a suo-moto writ petition arising from the Wayanad landslide, the Kerala High Court poignantly noted that survivors who had lost both their land and livelihoods were nevertheless being compelled to repay agricultural loans, even though the very property offered as collateral “has ceased to exist,” terming this an affront to dignity protected under Article 21. While stopping short of directing the Union Government to exercise its powers to write off loans, the court stayed recovery proceedings against Wayanad landslide survivors and sharply criticised the Centre’s refusal to act. Importantly, it also fixed accountability on banks and financial institutions, directing them to file affidavits explaining whether they were willing to waive the loans and, if not, to justify their position. This judicial recognition of lender responsibility converges with growing civil society demands: following the 2025 monsoon disasters, over 100 organisations and individuals jointly appealed to the Union Finance Minister, the Reserve Bank of India, and financial institutions for urgent, comprehensive loan relief for households and small enterprises devastated by climate disasters.
At one level, the new framework seeks to broaden applicability by covering borrowers affected not only by “natural calamities” recognised under the National Disaster Response Force (NDRF) framework, but also, by other external events such as riots. The directions come into force from April 1, 2026, and introduce defined timelines for invocation and implementation of resolution plans, thereby imparting procedural clarity.
At the outset, it is important to note that what are described in the draft Directions as “natural calamities” are, in reality, increasingly human-induced climate disasters, driven by policy choices, ecological degradation, and unregulated development. Events such as landslides in ecologically fragile regions following deforestation and construction, recurrent urban floods caused by concretisation and blocked drainage systems, and intensified droughts linked to groundwater over-extraction are not merely acts of nature. Treating such events as ‘natural’ obscures underlying accountability and understates the structural nature of borrower distress. This framing has direct implications for the design of relief, which must move beyond short-term prudential adjustments to acknowledge sustained and systemic loss of livelihoods.
Eligibility provisions need to be more inclusive
G. Eligibility & Coverage
19. Only those borrowers shall be eligible for resolution under these guidelines whose accounts are classified as ‘Standard’, and also not in default for more than 30 days with a bank in respect of any of their facilities, as on the date of occurrence of the natural calamity. (Draft – Commercial Banks – Relief Measures in areas affected by Natural Calamities)
The eligibility and coverage provisions remain deeply exclusionary. For instance Clause 19 for the guidelines for ‘Commercial Banks’ (and similar provisions for small finance banks, regional rural banks etc.) restricts eligibility strictly to borrowers whose accounts are classified as ‘Standard’ and who are not in default for more than 30 days as on the date of occurrence of the calamity. This criterion effectively excludes a vast section of borrowers in disaster-prone regions who may already be experiencing financial stress even prior to the event. In regions characterised by agrarian distress, informal employment, or repeated climate shocks, minor delays in repayment are common and structural in nature. By tying relief eligibility to pristine repayment behaviour, the framework privileges relatively better-off borrowers and systematically excludes the most vulnerable—those for whom disaster relief is most critical.
Resolution arrangements remain far short of expectation
Chapter III: Resolution Plan
22. The resolution plan to be implemented by a bank, conforming to these Directions, may include rescheduling of payments; conversion of any interest accrued or to be accrued into another credit facility; granting of moratorium etc. based on an assessment of the viability prospects of the borrower.
23. The resolution plan may also include proposal for sanctioning of additional finance to address the financial stress of the borrower, subject to due assessment of the viability prospects of the borrower.
24. Resolution under these guidelines shall be invoked no later than 45 days from the date of the declaration of natural calamity and shall be implemented within 90 days from the date of the invocation.
Chapter VIII: Ancillary Measures
39. A bank at its discretion, may provide further relief measures such as waiver/reduction of various fees and charges in respect of customers in the affected areas, for a period not exceeding one year. (Draft – Commercial Banks – Relief Measures in areas affected by Natural Calamities)
The definition of resolution arrangements under the framework is also limited in scope. Permissible measures include rescheduling of payments, conversion of accrued or future interest into another credit facility, and granting of moratoriums, subject to an assessment of borrower viability. While these instruments may provide temporary breathing space, they fall short of addressing deep and irreversible income losses caused by severe or recurrent calamities. The framework notably does not provide for loan waivers or principal write-offs as part of resolution plans. Instead, waiver or reduction is limited to ancillary fees and charges (Clause 39 of guidelines on ‘Commercial Banks’ and similar provisions for other REs), and even this is left entirely to bank discretion and capped at one year. This narrow conception of relief risks turning resolution into mere postponement of distress rather than genuine relief
Bank discretion without adequate appellate mechanisms
Chapter III: Resolution Plan
25. In exceptional cases, where it is not possible to complete the invocation formalities within the above period of 45 days, the SLBC / DCC convenor may approach the respective Regional Director / Officer-in-Charge of Reserve Bank for a one-time extension of 30 days for invocation. The request shall detail the reasons for not completing the exercise within the stipulated timeframe. Such requests may be considered by the Regional Director / Officer-in-Charge of Reserve Bank based on the merits of each case. (Draft – Commercial Banks – Relief Measures in areas affected by Natural Calamities)
The process architecture further reflects an excessive reliance on bank discretion without adequate countervailing safeguards. Invocation of resolution must occur within 45 days of the declaration of a calamity, with implementation required within 90 days from the date of invocation. While timelines are necessary, they may prove unrealistic in large-scale disasters where documentation, damage assessment, and borrower outreach are severely disrupted. Although a one-time extension of 30 days may be sought through the SLBC or DCC convenor, the framework does not adequately account for ground-level administrative and social constraints.
No provision to acknowledge civil society facilitated efforts and absence of grievance redressal mechanism
Critically, the draft Directions do not institutionalise any mechanism to recognise or respond to public and civil society demands for loan relief, which have historically emerged in the wake of disasters and more recently in instances such a s the Wayanad landslide of 2024. Loan relief in calamity-hit regions is not merely an individual banking decision but a collective socio-economic concern. The absence of provisions mandating consultation, transparency, or disclosure of relief decisions weakens democratic accountability. Equally important is the lack of a dedicated grievance redressal mechanism specific to calamity-related resolutions. Given the discretionary powers vested in banks, borrowers must have access to structured grievance redressal at both the bank level and the RBI regional office level to challenge exclusion, delays, or denial of relief.
At the same time, the framework does introduce certain positive regulatory shifts. By requiring banks to formulate explicit policies and procedures for dealing with natural calamities in line with RBI Directions, it reduces ad-hocism and improves preparedness. The provision allowing banks to consider restructuring and sanctioning fresh loans without waiting for the actual receipt of insurance claims is particularly significant, as insurance settlements are often delayed and uncertain, exacerbating post-disaster distress. Additionally, the mandated half-yearly reporting of relief measures on the CIMS portal introduces a degree of transparency, though the utility of such data will depend on public disclosure and scrutiny.
In conclusion, while the RBI’s draft Directions represent a move towards regulatory harmonisation and procedural clarity, they remain limited in their capacity to deliver substantive relief to disaster-affected borrowers. Exclusionary eligibility criteria, narrow resolution instruments that avoid waiver or write-offs, and the absence of formal grievance redressal and public accountability mechanisms significantly dilute the framework’s effectiveness. For the policy to meaningfully respond to the realities of disaster-induced indebtedness, it must shift from a narrowly prudential lens towards a more inclusive, rights-sensitive, and socially responsive approach.
