People affected by the massive floods in Jammu & Kashmir would be eligible for relief, including fresh loans, restructuring of existing loans and concessional interest rates from banks.
To facilitate coordination and expeditious action by the banks, the convener of the State Level Bankers’ Committee (SLBC) should convene a meeting immediately to evolve a coordinated action plan for implementation of the relief programme in collaboration with the state/ district authorities, says the Reserve Bank of India ‘Guidelines for relief measures by banks in areas affected by natural calamities’.
“J&K is now an ideal case for sops under the RBI guidelines,” said a bank official.
With around 650 branches in the state, Jammu & Kashmir Bank is the region’s lead bank. A spokesperson for the bank said coordinated action is yet to commence as road links, telecom and internet services are yet to be restored.
“Out of J&K Bank’s 200 plus affected branches, nearly 115 have restarted operations,” the spokesperson said.
According to the RBI, loans to existing borrowers for general consumption purposes may be sanctioned up to Rs 10,000 without any collateral. The limit may, however be enhanced beyond Rs 10,000 at the discretion of the bank.
Further, timely fresh financial assistance to resume productive activities may be provided not only to the existing borrowers, but also to other eligible borrowers. Notwithstanding the status of the existing account, fresh loans granted to the borrowers will be treated as current dues, the RBI says.
As the repaying capacity of the people affected by natural calamities gets severely impaired due to the damage to the economic pursuits and loss of economic assets, relief in repayment of loans becomes necessary in areas affected by natural calamity and hence, restructuring of the existing loans will be required.
“The principal amount of the short-term loan as well as interest due for repayment in the year of occurrence of natural calamity may be converted into term loan. In case of term loans the instalment of principal and interest due in the year of occurrence of natural calamity may also be converted into term loan,” it said.
The repayment period of restructured term loan may vary depending on the severity of calamity and its recurrence, the extent of loss of economic assets and distress caused.
Generally, the restructured period for repayment may be 3 to 5 years. However, where the damage arising out of the calamity is very severe, banks may, at their discretion, extend the period of repayment ranging up to 7 years and in extreme cases of hardship, the repayment period may be prolonged up to a maximum period of 10 years in consultation with the task force/ SLBC, it says.
In all cases of restructuring, moratorium period of at least one year should be considered. Further, the banks should not insist for additional collateral security for such restructured loans. Asset classification for restructured loans will remain the same as prevalent at the time of restructuring for a period of one year as per extant guidelines for restructured loans.
The RBI says margin requirements may be waived or the grants/ subsidy given by the concerned state government may be considered as margin.
On interest rates, the RBI says banks are expected to take a sympathetic view of the difficulties of the borrowers and extend a concessional treatment to calamity-affected people. In respect of current dues in default, no penal interest will be charged. The banks should also suitably defer the compounding of interest charges.
Banks may not levy any penal interest and consider waiving penal interest, if any, already charged in regard to the loans converted or rescheduled.