The Reserve Bank of India has issued the Reserve Bank of India (Rural Co-operative Banks – Income Recognition, Asset Classification and Provisioning) Amendment Directions, 2026 to rationalise and harmonise income recognition norms for Rural Co-operative Banks (RCBs).
Under the Reserve Bank of India (Rural Co-operative Banks – Income Recognition, Asset Classification and Provisioning) Directions, 2025, Rural Co-operative Banks were required to follow specific prudential norms on income recognition, including restrictions on recognising overdue income and requirements relating to provisioning. Income recognition for advances had linkage with recovery performance, and certain provisions (including matching provisions in specified cases) applied even in respect of Standard assets. Additionally, detailed prescriptions existed under paragraphs 52 to 56 and paragraph 58 governing income recognition and reversal norms.
The Amendment Directions, 2026 provide that:
Paragraph 52, paragraphs 53–56 and paragraph 58 of the 2025 Directions stand deleted.
A new paragraph 52A permits banks to recognise income (interest, fee, commission or other income) on accrual basis in respect of credit facilities classified as ‘Standard’, without the requirement of making any matching provision.
For non-Standard assets (including Government-guaranteed facilities), income shall be recognised strictly on actual receipt (cash basis).
A new paragraph 58A mandates reversal of the entire accrued income (interest, fees, commission and other income) in past periods if a credit facility becomes NPA and such income remains unrealised.
The amendments are effective immediately.
