RBI Permits Banks to Proactively Resolve Loans Affected by Natural Calamities
RBI allows banks to implement suo motu loan resolution in calamities
Business Standard
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The Reserve Bank of India (RBI) has authorized banks to implement loan resolution measures for borrowers impacted by natural disasters without waiting for formal requests. This initiative, based on recommendations from the State Level Bankers’ Committee, aims to support borrowers whose loans are standard and not in default for over 30 days.
- 01Banks can implement loan resolution plans without formal borrower requests.
- 02Resolution applies only to standard loans not in default for over 30 days.
- 03Banks must invoke resolution within 45 days of calamity declaration.
- 04Implementation of resolution must be completed within 135 days.
- 05A 30-day extension can be requested under certain conditions.
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The Reserve Bank of India (RBI) has introduced new guidelines allowing banks to proactively implement loan resolution plans for borrowers affected by natural calamities. According to the guidelines, banks can act on the recommendations from the State Level Bankers’ Committee (SLBC) without waiting for a formal request from borrowers. This resolution is applicable only to loans that are standard and not in default for more than 30 days as of the calamity's occurrence. The RBI mandates that banks must invoke these resolutions within 45 days of the calamity's declaration and complete implementation within 135 days. Additionally, if banks cannot meet these timelines, they can seek a one-time extension of 30 days from the RBI's regional director or officer-in-charge.
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This policy will help borrowers recover from financial distress caused by natural disasters, potentially preventing defaults and supporting local economies.
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