The Reserve Bank of India has amended its stressed asset directions for small finance banks to introduce a dedicated framework for resolving borrower accounts affected by natural calamities and certain external events, such as riots or disturbances that disrupt economic activity. The new Chapter VI-A replaces the earlier special-case restructuring provisions for these situations and requires each bank's board-approved policy to set objective relief principles, possible relief measures and delegation arrangements for timely action. Natural calamity is defined as an event recognised under the National Disaster Response Fund or State Disaster Response Fund. The framework applies once a calamity is declared by the central or state government. Special meetings of the State Level Bankers' Committee, Union Territory Level Bankers' Committee or District Consultative Committee must be convened within 15 days to assess the impact, identify affected borrowers and determine whether relief measures, including any moratorium, are needed. Eligible borrowers are those with accounts classified as standard and not more than 30 days in default on the date of occurrence of the calamity or, where that cannot be identified, on the date of declaration. Banks may then implement resolution plans that can include rescheduling of payments, conversion of accrued interest into another credit facility and additional finance, subject to viability assessment. Invocation must occur within 45 days of the declaration and implementation within 135 days, although banks may proceed without a formal borrower request after the committee recommendation, provided the borrower is informed and can opt out until the end of the 135-day period. In exceptional cases, the Reserve Bank may allow a one-time 30-day extension for invocation. Accounts that had already received relief by the effective date will remain under the existing prudential guidelines, while any fresh resolution after that date must follow the new chapter. The amendments also introduce reporting of calamity notifications and half-yearly relief data through the CIMS portal, require NIL reporting where no relief is extended, and make related changes to the small finance bank directions on credit risk management, income recognition asset classification and provisioning, and responsible business conduct. The changes take effect from July 1, 2026.
Reserve Bank of India 2026-04-29
Reserve Bank of India creates calamity resolution framework for small finance banks with 45 day invocation and 135 day implementation timelines
The Reserve Bank of India has amended its stressed asset directions for small finance banks to introduce a dedicated framework for resolving standard borrower accounts affected by natural calamities and specified external events. The new Chapter VI-A replaces earlier restructuring provisions, sets eligibility criteria and timelines for resolution plans, and permits measures such as payment rescheduling, interest conversion and additional finance subject to viability. The amendments also introduce CIMS-based reporting of calamity notifications and relief data and align related credit risk, asset classification, provisioning and conduct requirements, effective July 1, 2026.