RBI master-direction RBI/DOR/2026-27/398 · 27 Apr 2026
Official title
Reserve Bank of India (Commercial Banks - Asset Classification, Provisioning and Income Recognition) Directions, 2026
Summary
Check the official recordThe Reserve Bank of India introduces a new framework for asset classification, provisioning, and income recognition for commercial banks. Banks must adopt an Expected Credit Loss (ECL) approach for provisioning, replacing the existing incurred loss model. This framework requires banks to classify financial instruments into three stages based on credit risk changes since initial recognition. Banks must calculate ECL using probability-weighted outcomes, incorporating forward-looking macroeconomic variables. The directions mandate the use of the Effective Interest Rate (EIR) method for measuring financial assets. Specific prudential floors for ECL are established for various loan product categories. Banks must implement robust model risk management and governance frameworks. These directions come into force on April 1, 2027, and repeal the previous 2025 directions.
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If you do not comply
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