RBI Establishes Comprehensive Calamity-Linked Stressed Asset Resolution Framework for AIFIs — Effective July 1, 2026
Background and Regulatory Context
The Reserve Bank of India, through its circular RBI/2026-27/72 DOR.STR.REC.61/21-04-048/2026-27 dated April 29, 2026, has formally notified the Reserve Bank of India (All India Financial Institutions – Resolution of Stressed Assets) Amendment Directions, 2026. These directions introduce significant modifications to the existing Reserve Bank of India (All India Financial Institutions – Resolution of Stressed Assets) Directions, 2025, primarily by inserting a brand-new Chapter VI-A that governs the resolution of loan accounts belonging to assessees impacted by natural calamities and similar disruptive events.
This regulatory development has its origins in the Statement on Developmental and Regulatory Policies dated June 08, 2023, wherein the Reserve Bank had committed to rationalising prudential norms applicable to resolution plans for exposures affected by natural calamities. The objective included harmonising regulatory instructions across various Regulated Entities (REs). Following a comprehensive internal review of the existing framework and public consultation on the draft directions, the RBI has now issued the final Amendment Directions, exercising powers conferred under section 45L of the Reserve Bank of India Act, 1934.
Effective Date: July 1, 2026. All provisions under these Amendment Directions shall come into force from this date. Accounts where relief measures were already extended prior to this date shall continue to be governed by the earlier prudential guidelines, except that any fresh resolution action in such accounts post the effective date must comply with the new Chapter VI-A framework.
Key Definitional Insertions
New Definitions Under Paragraph 4
The Amendment Directions insert two critical definitions into the parent Directions:
Paragraph 4(3A) — Date of Invocation:
"The date on which the borrower and the AIFI agree to proceed with a resolution plan under Chapter VI-A of these Directions through a documented arrangement, other than in case of deemed invocation as specified in paragraph 119N of these Directions."
This definition is pivotal because it determines the commencement of the resolution timeline and distinguishes between voluntary invocation and suo motu/deemed invocation scenarios.
Paragraph 4(8A) — Natural Calamity:
"An event recognized under the National Disaster Response Fund (NDRF) / State Disaster Response Fund (SDRF)."
By anchoring the definition to the NDRF/SDRF framework, RBI has ensured that only officially recognised disasters trigger the special resolution provisions under Chapter VI-A, avoiding potential misuse of the framework for ordinary credit stress situations.
Board-Level Policy Obligations — Paragraph 12A
A new Paragraph 12A has been inserted, mandating that every All India Financial Institution (AIFI) incorporate provisions related to Chapter VI-A into its board-approved policy. Specifically, the policy must address the following:
- Objective principles governing the nature and extent of relief to be offered across different borrower and loan categories.
- Potential relief measures along with verifiable and objectively determinable parameters for their identification and application.
- Delegation matrix for decision-making and implementation of relief measures — including restructuring and sanction of additional finance — with a specific emphasis on timely execution.
This requirement reflects the RBI's intent to ensure that AIFIs are institutionally prepared before a calamity strikes, rather than scrambling to devise ad hoc policies at the time of crisis.
Chapter VI-A: Resolution of Accounts Impacted by Calamities — A Detailed Overview
Scope and Applicability — Paragraphs 119A and 119B
Paragraph 119A establishes that the provisions of Chapter VI-A apply to resolution of exposures of borrowers impacted by a natural calamity or, mutatis mutandis, to exposures impacted by external events such as riots or civil disturbances that cause loss to economic activity — collectively referred to as "calamity" in these directions. Activation of this Chapter is contingent upon the declaration of such calamity by the Central or State Government in accordance with the framework established by the concerned government.