RBI New Loan Restructuring Guidelines for Disaster-Hit Areas From July 1, 2026

The Reserve Bank of India had introduced the revised guidelines for loan restructuring for the disaster-hit areas and brings the greater flexibility for the banks and NBFCs. This new rule will be effective from the July 1, 2026 and this new framework will allows lenders to proactively restructure the loans without waiting for the borrower requests and also mandating the 5% provisioning requirement. This move aims to provide the faster financial relief to those affected borrowers along with maintaining the financial stability in the banking system.

RBI’s Key Reform: Faster Loan Relief Without Waiting for Borrowers

The important shift in the new norms is that the lenders can now initiate the loan restructuring on their own in those areas which are affected by natural disasters.

This ensures the,

• The immediate financial relief to the affected borrowers.
• Also the reduced delays to accessing support.
• And the improved responsiveness during the crises period.

Borrowers however will retain control with the 135-day opt-out window from the date of disaster declaration.

What Changes from July 1, 2026?

This revised rules will apply prospectively it means that the ,

The new restructuring cases will follow the updated norms.

Also the existing restructured loans will continue under the old rules unless revised again.

This framework is principle-based and giving lenders the flexibility to design solutions depending on the situation.

5% Provisioning Rule: Balancing Relief and Risk

A main feature of the policy is the mandatory 5% provisioning in which the Banks and NBFCs must set aside the 5% of outstanding loan value.

Also this is additional to the existing prudential provisions.

The RBI has also rejected the requests to lower it to 2% and stated that it will ensures the risk coverage for uncertain recovery scenarios.

It also avoids the treating such loans as high-risk restructured assets.

Eligibility Criteria: Only ‘Standard’ Accounts Allowed

The RBI has also maintained the strict eligibility conditions,

The only standard accounts are eligible.

The loans must not be overdue by more than the 30 days at the time of disaster.

Also the requests to extend eligibility up to 89 days overdue were rejected to ensure that the relief targets genuine disaster-affected borrowers.

Strict Timelines for Implementation

To ensure the timely support the RBI has introduced clear deadlines.

The resolution must start within 45 days of disaster declaration.

And the implementation must be completed within 90 days.

This will prevents the delays and ensures quick financial recovery for affected regions.