RBI warns banks to respect relief norms during natural hazards

The direction follows a Supreme Court order -- on a Writ Petition by Swaraj Abhiyan against Union of India and others -- wherein it asked the central government, states and Reserve Bank as well as other banks to "religiously implement their policies since they are ultimately intended for the benefit of the people of our country and not for the benefit of any stranger".

The court order last month had also slammed the Centre for not giving compensation to workers for delayed payment of work under MNREGA scheme in drought-like situation and said it "does not behove a welfare state" as "social justice has been thrown out of the window".

 Following that, RBI said all the banks (excluding RRBs) "are advised to ensure implementation of our guidelines on Relief Measures by banks in areas affected by Natural Calamities contained in our Master Circular dated July 1, 2015". As per the guidelines, the banks' contribution in providing relief relates to rescheduling of existing loans and sanctioning of fresh loans as per the emerging requirements of the borrowers.

It says that banks need to have some institutional framework in place to deal with the situation and they may also like to take some other facilitating measures like reducing/waiving their penal charges. "The precise details in regard to the provision of credit assistance by the commercial banks will depend on the requirements of the situation, their own operational capabilities and the actual needs of the borrowers," it said.

 In terms of National Disaster Management Framework, there are two funds constituted -- National Disaster Response Fund and State Disaster Response Fund for providing relief in the affected areas.