Jan 5, 2021

The Reserve Bank of India (RBI) is the central bank of India. RBI is known to be a useful adviser to the government on matters related to economic and monetary policy. Disaster management accounts for the heavy toll it can take on human life and cause damage to the economic growth in some parts of the country. Disaster management includes providing relief to people for the loss of life and injuries caused by the natural calamities or crisis as well as compensating for the impact on the economy and development also has to be considered. 

Disaster management consists of relief, preparedness, prevention, and rehabilitation to achieve the goal of sustainability. Natural calamities are identified as floods, earthquakes, tsunamis, droughts, landslides, cyclones, etc. That can lead to economic imbalance and loss of life in the affected areas. For this the Government of India has established the National Disaster Management Authority (NDMA), which is a superior body for disaster management in India. It comes under the prime minister of India. NDMA has the responsibility of laying down guidelines for policies for disaster management, and they have to be followed by the departments and ministries of the government of India. The purpose of NDMA is to amalgamate measures for the prevention of disaster, and its effects on the development of plans and projects. RBI plays a role in disaster management by issuing guidelines concerning those of NDMA on ensuring disaster-resilient construction of buildings and infrastructure financed through banks and other leading institutions to all the scheduled commercial banks. It directs banks to adopt NDMA guidelines that apply to new construction, which is financed by them. The asset, as well as its location of the disaster, will ascertain the commercial bank, which can incorporate these guidelines on constructions before the loans are even sanctioned.        

RBI also issued guidelines on relief measures by banks in areas affected by natural calamities. These measures are issued and are applied to all the scheduled commercial banks licensed to operate in India. It's a fact that natural calamities take a toll on human life and the economic growth of a country. To curb this, RBI has issued guidelines to lend their active support in reviving the economic activities affected in areas affected by natural calamities. Mainly the role of commercial and cooperative banks has been highlighted in development and economic activities after the disaster. They give details regarding credit assistance and facilitate coordination. This policy framework provides financial assistance to Farmers, small artisans, small scale industrial units, and trading establishments affected by the natural calamities.

RBI in consultation with the government has set up a committee Bimal Jalan committee led by the central bank’s former governor Bimal Jalan to look into its economic framework and curb the situation of an economic slowdown. In times of crisis like the current times of COVID-19 pandemic, its effect on the economy can be destructive as there was reduced consumption, especially in the service industry, and the industry won’t be able to make up for the lost consumption.RBI support this business by giving out loans for their survival. According to the Bimal plan, if a financial crisis happens in this situation, the RBI should be able to recapitalize the banks. Covid-19 can cause irrecoverable damage to the economic growth of our country once this pandemic is over. Therefore, RBI can play the following roles to help curb the economic slowdown. 

  • If RBI has more contingent funds, it can inject money into the bank and the economy as and when needed. 
  • It can encourage banks to invest in corporate bonds for further liquidity. 
  • Due to COVID-19, the agriculture sector is facing the worst hit due to the closing of state borders. RBI can issue guidelines for a rural bank to provide farmers with loans at less interest. 
  • Seeing the current situation of the Indian education system, where the classes have to be taken online, but because of technological barriers, certain institutions are not able to provide online lectures to their students. RBI can issue guidelines to provide loans at less interest rate to the educational institutions in need of financial help. 

RBI, as the central bank of India, plays an important part to maintain the financial liquidity in the economy, and curb the economic slowdown. It works as the backbone of the economy. It manages the disaster that our economy faces because of natural calamities as well as the financial crisis caused due to other reasons.