RBI Drafts Unified 2026 Framework for Resolution of Natural Calamity Stressed Assets: A Comprehensive Guide for Lenders and Borrowers

The Reserve Bank of India (RBI) has initiated a pivotal shift in the regulatory landscape regarding disaster management finance. On January 27, 2026, the central bank released a comprehensive set of draft guidelines aimed at harmonizing the relief measures offered to borrowers affected by natural calamities. This proposed framework seeks to replace the fragmented instructions currently in existence with a consolidated, principle-based regime applicable across the entire spectrum of Regulated Entities (REs).

The proposed directions, titled "Relief Measures in areas affected by Natural Calamities," are slated to come into force from April 01, 2026. These guidelines empower financial institutions with greater discretion to formulate resolution plans while mandating strict adherence to timelines and asset classification norms.

1. Regulatory Authority and Applicability

The draft directions are issued under the powers conferred by Section 21 and Section 35A of the Banking Regulation Act, 1949. The primary objective is to ensure that the economic impact of natural disasters is mitigated through timely financial intervention without compromising the prudential health of the banking sector.

Scope of Application

The unified framework is designed to apply to a wide array of financial institutions, ensuring that a borrower in a calamity-hit region receives consistent treatment regardless of their lender type. The guidelines cover:

  • Commercial Banks (including Small Finance Banks)
  • Local Area Banks
  • Regional Rural Banks (RRBs)
  • Primary (Urban) Co-operative Banks (UCBs)
  • State and Central Co-operative Banks (Rural Co-operative Banks)
  • Non-Banking Financial Companies (NBFCs)
  • All-India Financial Institutions (AIFIs)

Note: The guidelines explicitly exclude the refinance portfolios of banks from these relief measures.

2. Defining the Crisis: Triggers for Relief

The framework does not leave the definition of a disaster to the discretion of individual banks. Instead, it relies on formal declarations by government authorities.

The Trigger Mechanism

The relief measures are activated strictly upon the declaration of a "natural calamity" by the Central or State Government. The definition of a natural calamity is aligned with the events recognized under the National Disaster Response Force (NDRF) Framework.

Furthermore, the guidelines extend mutatis mutandis to "external events," such as riots or civil disturbances, provided these events result in significant loss to economic activity and are formally declared by the relevant government authorities.

The Role of Bankers’ Committees

The operationalization of relief is heavily dependent on the State Level Bankers’ Committee (SLBC) and the District Consultative Committee (DCC).

  1. State-Wide Impact: If a calamity affects a large portion of a state, the SLBC convenor must organize a special meeting within 15 days of the government declaration.
  2. Localized Impact: If the impact is restricted to specific districts, the DCC convenor of the affected district must convene a meeting within 15 days, in consultation with the SLBC.