Reserve Bank of India (Commercial Banks – Income Recognition, Asset Classification and Provisioning) Directions, 2025
The Reserve Bank of India (RBI), on November 28, 2025, issued the Reserve Bank of India (Commercial Banks – Income Recognition, Asset Classification and Provisioning) Directions, 2025, establishing a comprehensive prudential framework for recognition of income, classification of assets, and provisioning of advances by commercial banks. These Directions apply to all commercial banks except SFBs, PBs and LABs, and operate alongside the RBI’s guidelines on resolution of stressed assets. They aim to ensure transparency, consistency and prudence in the treatment of loan assets in line with long-standing reforms initiated after the Narasimham Committee.
The framework prescribes uniform definitions for NPAs, substandard, doubtful and loss assets; governs security valuation, overdue and out-of-order status; and mandates automation of IRAC processes to eliminate manual overrides. It lays out detailed asset-classification rules, including special situations (e.g., agricultural loans, restructuring, project finance, CRE/CERH exposures) and criteria for upgradation from NPA to standard. Provisioning norms are stipulated for standard, substandard, doubtful and loss assets—with specific rules for floating provisions, additional provisions, prudential floors under special circumstances, and computation/monitoring of Provisioning Coverage Ratio (PCR).
The Directions further require prudent income recognition—mandating reversal of unrealised interest, rules for application of interest on NPAs, order of appropriation on recoveries, and treatment in special scenarios. Banks must maintain board-approved IRAC policies, follow consumer-education responsibilities, and adhere to disclosure requirements. The Directions also repeal earlier circulars to the extent of inconsistency.
[Notification No. RBI/DOR/2025-26/164]
