Under Disaster Management Act 2005, a financial mechanism has been set up by way of National Disaster Response Fund (NDRF) at national level and State Disaster Response Fund (SDRF) at state level to meet rescue and relief expenditure during any notified disaster.

• Union Government has enhanced its contribution in State Disaster Response fund (SDRF) from 75% to 90%.
• Any amount spent by the state for such disasters over and above the specified ceiling would have to be borne out of its own resources and it would be subject to the same accounting norms.
• If the amount available under the SDRF is not sufficient, states can request for making available assistance from a similar fund managed by the central Government - National Disaster Response Fund (NDRF).
• The financial assistance from SDRF/NDRF is for providing immediate relief and is not compensation for loss/damage to properties /crops
• Further, the provision for disaster preparedness, restoration, reconstruction and mitigation are not a part of SDRF (The DM Act specifies that for such activities a separate fund called Disaster Mitigation Fund has to be constituted).
• However, 5% of the annual allocation to SDRF can be kept for specified capacity building activities by the states in the area of disaster management.