RBI/DOR/2025-26/164
DOR.STR.REC.83./21.04.048/2025-26
November 28, 2025
Previous Versions
Reserve Bank of India (Commercial Banks – Income Recognition, Asset Classification and Provisioning) Directions, 2025 (updated as on July 01, 2026)
Table of Contents
Chapter I - Preliminary
A. Short title and commencement
B. Applicability
C. Definitions
Chapter II - General Instructions
A. Role of the Board
B. Prudence in Lending and Consumer Education
C. Disclosure Requirements
Chapter III - Asset Classification
A. General Instructions on Asset Classification
B. Automation of Income Recognition, Asset Classification and Provisioning processes
C. Classification as non-performing asset
D. Accounts regularised near about the balance sheet date
E. Specific cases of asset classification
F. Categories of non-performing assets
G. Upgradation of loan accounts classified as NPAs
Chapter IV - Provisioning Norms
A. General Principles for Provisioning
B. Provisions in respect of Standard assets
B1. Additional specific provisioning in case of resolution plan implemented under Chapter VI-A of the Reserve Bank of India (Commercial Banks – Resolution of Stressed Assets) Directions, 2025
C. Provisions in respect of substandard assets
D. Provisions in respect of Doubtful Assets
E. Provisions in respect of Loss Assets
F. Prudential norms on creation and utilisation of floating provisions
G. Additional Provisions at higher than prescribed rates
H. Provisions under Special Circumstances
I. Provisioning Coverage Ratio (PCR)
Chapter V - Income Recognition
A. General Principles for Income Recognition
B. Reversal of income upon classification as NPA
C. Interest application after NPA classification
D. Appropriation of recovery from NPAs
E. Income recognition in special cases
F. Tax treatment in respect of provisions
Chapter VI - Repeal and Other Provisions
A. Repeal and saving
B. Application of other laws not barred
C. Interpretations
Annex I
Annex II
Introduction
Reserve Bank of India (‘Reserve Bank’) is statutorily mandated to operate the credit system of the country to its advantage. In line with the international practices and as per the recommendations made by the Committee on the Financial System (Chairman Shri M. Narasimham), the Reserve Bank has introduced, in a phased manner, prudential norms for income recognition, asset classification and provisioning for the advances portfolio of banks so as to move towards greater consistency and transparency in the published accounts.
In exercise of powers conferred by Sections 21, and 35A of the Banking Regulation Act, 1949, and Section 6 of the Factoring Regulation Act, 2011, the Reserve Bank being satisfied that it is necessary and expedient in the public interest so to do, hereby issues these Directions hereinafter specified.
Chapter I - Preliminary
A. Short title and commencement
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These directions shall be called the Reserve Bank of India (Commercial Banks – Income Recognition, Asset Classification and Provisioning) Directions, 2025.
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These directions shall come into force with immediate effect.
B. Applicability
- These Directions shall be applicable to Commercial Banks (hereinafter collectively referred to as 'banks' and individually as a 'bank').
For the purpose of these Directions, ‘Commercial Banks’ means banking companies (other than Small Finance Banks, Payment Banks, and Local Area Banks), corresponding new banks, and the State Bank of India, as defined respectively under clauses (c), (da), and (nc) of Section 5 of the Banking Regulation Act, 1949
- A bank shall also follow the prudential guidelines on income recognition, asset classification and provisioning of advances for restructured accounts as prescribed in the Reserve Bank of India (Commercial Banks – Resolution of Stressed Assets) Directions, 2025, in addition to these Directions.
C. Definitions
- In these Directions, unless the context states otherwise, the terms herein shall bear the meaning assigned to them below:
- (1) ‘crop season’ for each crop, shall mean the period up to harvesting of the crops raised, as determined by the State Level Bankers’ Committee (SLBC) in each State;
- (2) ‘doubtful asset’ shall mean an asset which has remained in the substandard category for a period of twelve months;
- (3) ‘exposure’ shall include all funded and non-funded exposures (including underwriting and similar commitments).
- (4) ‘long duration crops’ shall mean crops with crop season longer than one year;
- (5) ‘loss asset’ shall mean an asset where loss has been identified by a bank or internal or external auditors or the inspection conducted by the Reserve Bank, but the amount has not been written off wholly by the bank;
- (6) ‘non-performing asset’ shall mean an asset, including a leased asset, which has ceased to generate income for a bank;
- (7) ‘out of order status’ – a cash credit / overdraft (CC / OD) account shall be treated as ‘out of order’ if any of the following conditions are satisfied:
- (i) the outstanding balance remains continuously in excess of the sanctioned limit / drawing power for 90 days;
- (ii) the outstanding balance is less than the sanctioned limit / drawing power but there are no credits continuously for 90 days;
- (iii) the outstanding balance is less than the sanctioned limit / drawing power but credits are not enough to cover the interest debited during the previous 90 days period.
Explanation 1: ‘Previous 90 days period’ referred to in (iii) above shall be inclusive of the day for which the day-end process is being run.
Explanation 2: The definition of ‘out of order’ shall be applicable to all credit products being offered as an overdraft facility, including those not meant for business purpose and / or which entail interest repayments as the only credits.
- (8) ‘overdue’ status – any amount due to a bank under any credit facility shall be treated as ‘overdue’ if it is not paid on the due date fixed by the bank.
- (9) ‘provisioning coverage ratio (PCR)’ shall mean the ratio of provisioning to gross non-performing assets and indicates the extent of funds kept aside to cover loan losses;
- (10) ‘security’ shall mean tangible security properly charged to the bank and will not include intangible securities like guarantees (including State government guarantees), comfort letters, etc.
- (11) ‘short duration crops’ shall mean crops which are not ‘long duration’ crops;
- (12) ‘substandard asset’ shall mean an asset, which has remained NPA for a period less than or equal to twelve months;
- (13) ‘unsecured exposure’ shall mean an exposure where the realisable value of the security, as assessed by a bank / approved valuers / the Reserve Bank’s inspecting officers, is not more than ten per cent, ab-initio, of the outstanding exposure.
- (14) ‘wilful defaulter’ shall mean the same as defined under the Reserve Bank of India (Commercial Banks – Treatment of Wilful Defaulters and Large Defaulters) Directions, 2025.
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The definitions of the terms ‘Micro Enterprises’, ‘Small Enterprises’, and ‘Medium Enterprises’ shall be in terms of the circular FIDD.MSME & NFS.BC.No.3/06.02.31/2020-21 dated July 2, 2020 on ‘Credit flow to Micro, Small and Medium Enterprises Sector’, as updated from time to time.
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The terms ‘credit event’ and ‘default’ shall have the same meaning as assigned to it in the Reserve Bank of India (Commercial Banks – Resolution of Stressed Assets) Directions, 2025.
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The terms ‘Commercial Real Estate (CRE)’, ‘Commercial Real Estate – Residential Housing Sector (CRE - RH)’, ‘project finance’, and ‘financial closure’ shall have the same meaning assigned to them in the Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025.
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All other expressions unless defined herein shall have the same meaning as have been assigned to them under the Banking Regulation Act, 1949 or the Reserve Bank of India Act, 1934, or the Companies Act, 2013, or any statutory modification or re-enactment thereto or other regulations issued by the Reserve Bank or the Glossary of Terms published by the Reserve Bank or as used in commercial parlance, as the case may be.
