In a significant development regarding the aftermath of the Wayanad landslide that occurred in July 2023, the Union Government has informed the Kerala High Court that loans of the affected victims will not be waived. Instead, the Centre has stated that it will adhere to the Reserve Bank of India’s (RBI) Master Directions on Relief Measures for Natural Calamities, which focus on restructuring and rescheduling loans, not full waivers.

Background: The Wayanad Landslide

On July 30, 2023, a massive landslide hit Mundakkai and Chooralmala regions in Wayanad, Kerala. This catastrophic event led to the death of over 200 people, hundreds of injuries, and 32 individuals reported missing. The disaster wiped out entire communities, prompting national concern and immediate intervention by the Kerala government and judiciary.

Recognizing the scale of destruction, the Kerala High Court initiated a Public Interest Litigation (PIL) suo moto (on its own motion) to push for enhanced disaster management and relief for affected residents.

Centre’s Affidavit: Relief but No Waiver

Responding to the High Court’s query on whether loan waivers could be granted to victims, the Union Finance Ministry filed an affidavit clarifying the Centre’s stance. The affidavit specifically mentions:

• Loans will not be waived.

• Relief will be extended in the form of rescheduling and restructuring, consistent with the RBI’s Master Directions.

• These measures will include a one-year moratorium on existing loans and the availability of fresh credit.

The Centre stressed that the relief actions are consistent with India’s broader policy on natural calamities, aiming to maintain financial discipline while supporting recovery.

The Role of SLBC and Kerala CM

The affidavit also revealed that a special meeting of the State Level Bankers’ Committee (SLBC) Kerala was held on August 19, 2023. This meeting, which was chaired by Kerala Chief Minister Pinarayi Vijayan, reviewed the calamity’s impact and agreed to extend applicable relief based on RBI guidelines.

The SLBC's decisions included:

• Implementing a one-year moratorium for victims.

• Restructuring loans to ease the repayment burden.

• Disbursing fresh loans to support livelihood revival.

These decisions aim to provide short-term relief and financial stability to the affected families, enabling them to rebuild without additional stress from existing loans.

RBI’s Master Directions on Natural Calamities

The RBI’s guidelines on providing relief after natural disasters form the legal and policy framework for banks across India. Key points include:

• Restructuring of existing term loans, with relaxed repayment terms.

• Granting of fresh loans, especially in sectors like agriculture, MSMEs, and housing.

• No direct waiver unless explicitly approved under extraordinary circumstances.

By adhering to these directions, the Centre maintains a standardised response mechanism across all states facing calamities, ensuring consistency and banking sector stability.

Kerala High Court’s PIL and Expectations

The PIL initiated by the Kerala High Court bench of Justices AK Jayasankaran Nambiar and Easwaran S sought answers on:

• Whether a loan waiver could be granted.

• Whether the disaster response mechanisms in the state are effective.

• How future calamities can be managed more efficiently.

The court took this proactive step considering the scale of human tragedy and the need for better prevention and rehabilitation strategies. While the court has taken note of the Centre’s affidavit, further hearings are likely to evaluate if the existing measures are adequate or whether state-specific relief is needed.

Political and Public Reaction

The Centre’s refusal to waive loans has drawn mixed responses. While financial institutions and policy experts have supported the structured approach under RBI rules, public sentiment in Kerala has leaned towards demanding more generous aid.

Some affected families have expressed disappointment, hoping for a complete waiver in view of their total loss of homes and livelihoods.

What Happens Next?

• Banks in Kerala will implement the restructuring measures immediately, offering victims a one-year moratorium and potential access to fresh funds.

• The Kerala government may consider offering additional state-level relief, including possible subsidies or grants for rebuilding homes and livelihoods.

• The High Court will continue monitoring the implementation of these measures and may issue further directions if needed.

Conclusion

The Centre’s decision to reschedule and restructure loans instead of offering a blanket waiver reflects its reliance on RBI’s established disaster relief norms. While this ensures consistency across the country, it has also sparked a debate on whether extraordinary calamities like the Wayanad landslide deserve exceptional financial relief.

As Kerala continues to rebuild, the focus will remain on efficient loan restructuring, speedy credit access, and enhanced disaster preparedness, guided by both judicial oversight and central policy frameworks.

The Upcoming IPOs in this week and coming weeks are Aten Papers & Foam.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst.