Reserve Bank of India (Local Area Banks – Income Recognition, Asset Classification and Provisioning) Second Amendment Directions, 2026
RBI notification RBI/2026-27/202 · 16 Jul 2026
RBI notification RBI/2026-27/202 · 16 Jul 2026
Summary
Check the official recordThe Reserve Bank of India has amended income recognition norms for Local Area Banks regarding Specified Non-Financial Assets (SNFA). Banks are prohibited from recognizing accrued but unrealized interest or charges from extinguished exposures prior to SNFA acquisition. For SNFAs held as of September 30, 2026, any previously recognized unrealized income must be reversed through the Profit and Loss account by September 30, 2027. Furthermore, income derived from SNFAs must be recorded as 'non-interest / other income' in the year of realization, while expenses related to SNFA upkeep must be accounted for in the year they are incurred. These directions become effective on October 1, 2026.
What you must do
Key dates
Who is affected
RBI/2026-27/202 DOR.STR.REC.167/21-04-048/2026-27 July 16, 2026
Reserve Bank of India (Local Area Banks – Income Recognition, Asset Classification and Provisioning) Second Amendment Directions, 2026
Please refer to Reserve Bank of India (Local Area Banks – Resolution of Stressed Assets) Second Amendment Directions, 2026 dated July 16, 2026.
Consequent to the aforesaid Amendment Directions, in exercise of the powers conferred by the sections 21 and 35A of the Banking Regulation Act, 1949 and all other laws enabling the Reserve Bank in this regard, the Reserve Bank being satisfied that it is necessary and expedient in the public interest so to do, hereby issues the Amendment Directions hereinafter specified.
These Amendment Directions modify the Directions as under:
(i) The following shall be inserted in Chapter V – Income Recognition:
“E1. Income Recognition in case of acquisition of Specified Non-Financial Assets (SNFA)
119C. Any accrued but unrealised interest and / or charges from the extinguished exposure pertaining to periods prior to acquisition of an SNFA, shall not be recognised as income upon acquisition of the SNFA. Where such income has been recognised in respect of any SNFA outstanding in the books of a bank as on September 30, 2026, it shall be reversed through Profit and Loss account, latest by September 30, 2027, to the extent remaining unrealised as on that date.
119D. Any income received from an SNFA shall be recognised in the income statement as ‘non-interest / other income’, in the financial year in which it is realised. Similarly, any expense incurred towards upkeep of an SNFA shall be accounted for in the income statement in the financial year in which it is incurred.”
(Vaibhav Chaturvedi) Chief General Manager