India’s central bank, the Reserve Bank of India (RBI), has developed a new framework that allows lenders to provide relief to borrowers affected by natural catastrophes in the face of escalating climate-related disruptions.
Under the guidelines, banks and regulated businesses may give loan rescheduling, repayment moratoriums, interest conversion into a funded credit facility, and extra financial assistance. Borrowers who have not defaulted in more than 30 days before the disaster will be eligible for relief.
The rules will go into effect on July 1, with lenders given a 135-day window to prolong relief, giving borrowers the option to opt out if they like. Financial institutions will also be required to include these resolution methods in their internal credit policies.
The action follows draft guidelines announced earlier this year and is in response to the growing frequency of catastrophic weather events hurting agriculture, infrastructure, and household incomes in India.
The new framework applies to a wide range of financial entities, including commercial banks, cooperative banks, regional rural banks, small finance banks, and non-banking financial institutions.
Source – CNBC-TV18
