RBI directs banks to incorporate disaster management guidelines for infra, building loans  

May 13, 2011

The Reserve Bank says that incorporating the National Disaster Management guidelines in loan policies and documentation of banks will benefit lenders and borrowers

Moneylife Digital Team

The Reserve Bank of India (RBI) has issued a notification to all scheduled commercial banks, directing them to adopt the National Disaster Management (NDMA) guidelines and incorporate these as part of their loan policies and documentation. The guideline will apply to infrastructure projects, commercial buildings, and housing structures.

"We have examined the NDMA guidelines in consultation with the Indian Banks' Association and National Housing Bank and are of the view that adoption of the guidelines would be in the interest of lenders and borrowers," the RBI said in a statement on Thursday.

The NDMA guidelines specify that instead of depending on civic authorities and architects' certificates, banks should independently verify whether the proposed structure is stable and can endure natural hazards like landslides, floods, cyclones and earthquakes. Similar guidelines are available for redevelopment projects.

"It will help the banks to ensure disaster-resilience and safety of bank-financed assets by themselves (without relying on the techno-legal processes controlled by ULBs). By using these guidelines, the verification wings of banks and their empanelled technical experts will be in a position to check that the safety-related codes and regulations, as specified in NBC-2005 and various Indian Standards, are complied with and the designs of the proposed buildings and structures are multi-disaster-resilient," the NDMA guidelines state. The task can be also referred to (a group of) professional architect/experts with credible reputation.

Ms Alpana Kilawala, chief general manager in the RBI's department of communications, said, "Generally our guidelines are mandatory, but we don't have any deadlines. It is in the interest of the banks themselves to incorporate the NDMA guidelines. We just give them the guidelines, according to which they frame their own policies. However, if something exceptional happens, we set a deadline and later take other regulatory action." The banks are free to form their internal panel of experts, Ms Kilawala said.

The NDMA directive cites the failure of civic authorities to stop construction of unsafe buildings. Many old buildings in the metros have fallen short of the NDMA benchmarks, and have caused heavy losses in calamity-stricken areas. The RBI directive comes at a time when redevelopment of older structures is being undertaken in the major metros. Many of these structures did not comply with building safety regulations.