RBI master-direction RBI/DOR/2025-26/262 · 28 Nov 2025
Official title
Reserve Bank of India (Regional Rural Banks – Income Recognition, Asset Classification and Provisioning) Directions, 2025 (updated as on July 01, 2026)
Summary
Check the official recordThe Reserve Bank of India establishes prudential norms for Regional Rural Banks regarding income recognition, asset classification, and provisioning. Banks must classify loans as standard or non-performing assets based on specific delinquency criteria, including a 90-day overdue threshold for most facilities. The Directions mandate automated IT-based systems for asset classification and provisioning to ensure consistency and transparency. Banks must maintain specific provisioning levels for standard, sub-standard, doubtful, and loss assets. Income recognition follows an accrual basis for standard assets and a cash basis for non-performing assets. These rules apply to all Regional Rural Banks and supersede previous instructions. Banks must ensure compliance through internal systems and periodic audits.
What you must do
Key dates
Who is affected
Thresholds
Exceptions
If you do not comply
RBI/DOR/2025-26/262 DOR.STR.REC.181/21.04.048/2025-26 November 28, 2025 Previous Versions Reserve Bank of India (Regional Rural 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. General Instructions B. Disclosure Requirements Chapter III - Asset Classification A. Asset Classification Norms B. Specific cases of asset classification C. Valuation of Security D. Categories of non-performing assets E. Upgradation of loan accounts classified as NPAs F. Automation of Income Recognition, Asset Classification and Provisioning processes Chapter IV - Provisioning Norms A. Provisioning Requirements B. Additional specific provisioning in case of resolution plan implemented under Chapter IV-A of the Reserve Bank of India (Regional Rural Banks – Resolution of Stressed Assets) Directions, 2025 Chapter V - Income Recognition A. Income Recognition Chapter VI - Repeal and Other Provisions A. Repeal and saving B. Application of other laws not barred C. Interpretations
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, the Reserve Bank being satisfied that it is necessary and expedient in the public interest so to do, hereby issues these Directions hereinafter specified.
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; A loan classified as doubtful has all the weaknesses inherent in that classified as sub-standard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. Here too, as in the case of sub-standard assets rescheduling does not entitle a bank to upgrade the quality of an advance automatically (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 NABARD, but the amount has not been written off wholly or partly 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: the outstanding balance remains continuously in excess of the sanctioned limit / drawing power for 90 days; the outstanding balance is less than the sanctioned limit / drawing power but there are no credits continuously for 90 days; 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 sub-paragraph (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; In such cases, the current net worth of the borrower/guarantor or the current market value of the security charged is not enough to ensure recovery of the dues to the bank in full.
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.
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.
A bank shall comply with the following instructions in respect of all loans sanctioned on or after December 31, 2021: (1) The exact due dates for repayment of a loan, frequency of repayment, breakup between principal and interest, examples of dates of classification as special mention account (SMA) / non-performing asset (NPA), etc. shall be clearly specified in the loan agreement. (2) The borrower shall be apprised of the same at the time of loan sanction and also at the time of subsequent changes, if any, to the sanction terms/loan agreement till full repayment of the loan. (3) In cases of loan facilities with moratorium on payment of principal and / or interest, the exact date of commencement of repayment shall also be specified in the loan agreements.
In case of loans sanctioned before December 31, 2021, compliance to the instructions in paragraph 8 shall be ensured as and when such loans become due for renewal/review.
A bank shall apply the following principles in respect of working capital accounts sanctioned by them: (1) Ensure that drawings in the working capital accounts are covered by the adequacy of current assets; (2) Stock statements relied upon by the bank for determining drawing power should not be older than three months; (3) The outstanding in the account based on drawing power calculated from stock statements older than three months, shall be deemed as irregular.
Regular and ad hoc credit limits shall be reviewed / regularised not later than three months from the due date / date of ad hoc sanction.
In case of constraints such as non-availability of financial statements and other data from the borrowers, a bank should furnish evidence to show that renewal / review of credit limits is already on and would be completed soon.
Notwithstanding paragraph 12, delay beyond six months is not considered desirable as a general discipline. Hence, an account where the regular/adhoc credit limits have not been reviewed / renewed within 180 days from the due date/date of ad hoc sanction should be treated as NPA.
If the debits arising out of devolvement of letters of credit or invoked guarantees are parked in a separate account, the balance outstanding in that account also should be treated as a part of the borrower's principal operating account for the purpose of application of these Directions.
A bank shall flag a borrower account as overdue, if so, as part of their day-end processes for the due date, irrespective of the time of running such processes.
Similarly, classification of borrower accounts as SMA as well as NPA shall be done as part of day-end process for the relevant date and the SMA or NPA classification date shall be the calendar date for which the day end process is run. Thus, the date of SMA / NPA shall reflect the asset classification status of an account at the day-end of that calendar date.
