RBI Tightens NPA Divergence Disclosure Norms for Banks and UCBs
Current · Source: Reserve Bank of India · RBI/2022-23/130 · issued 11 Oct 2022 · ~2 min read
Quick answerRBI now requires commercial banks and Urban Co-operative Banks to disclose asset classification and provisioning divergences if additional NPA provisioning exceeds 5% of reported profit before provisions and contingencies, or additional gross NPAs exceed 5% (15% for UCBs) of reported incremental gross NPAs, effective FY2023-24.
The rule, in the simplest words
Banks and UCBs must disclose asset classification and provisioning divergences if additional NPA provisioning exceeds 5% of reported profit before provisions and contingencies.
Banks and UCBs must disclose asset classification and provisioning divergences if additional gross NPAs exceed 5% (15% for UCBs) of reported incremental gross NPAs.
The thresholds for disclosing divergences are 5% for provisioning and 5% for incremental NPAs for commercial banks, and 5% for provisioning and 15% for incremental NPAs for UCBs.
How it plays out — a real example
Rahul, a co-operative bank branch officer in Indore, reviews the bank's financial statements for the year ending March 31, 2024. He notices that the additional provisioning for non-performing assets (NPAs) assessed by the RBI exceeds 5% of the reported profit before provisions and contingencies. Rahul ensures that the bank makes suitable disclosures in the annual financial statements, following the RBI's directions.
What changed
RBI extended divergence disclosure rules, previously only for commercial banks, to Primary (Urban) Co-operative Banks (UCBs) from FY2022-23. For FY2022-23, thresholds were 10% for both provisioning and incremental NPAs (15% for UCBs incremental NPAs); from FY2023-24 onwards, thresholds tightened to 5% for commercial banks on both counts, while UCBs remain at 5% for provisioning and 15% for incremental NPAs, subject to review.
What it means for you
Banks and UCBs must now publicly disclose RBI-assessed divergences in asset classification and provisioning when they cross lower thresholds, increasing transparency and compliance pressure. This will likely lead to more conservative provisioning and closer scrutiny of NPA reporting, especially for UCBs which face a higher incremental NPA threshold initially.
What you must do
Review your bank's current divergence assessment processes to align with the new lower thresholds from FY2023-24.
Ensure UCBs update their reporting systems to handle the 15% incremental gross NPA threshold for FY2022-23 and prepare for potential reduction.
Train finance and compliance teams on the revised disclosure requirements in the notes to annual financial statements.
Monitor RBI inspection findings closely to pre-empt any divergence that could trigger mandatory disclosure.
Who it affects
All commercial banks (excluding Regional Rural Banks), All Primary (Urban) Co-operative Banks (UCBs), Bank finance and compliance departments, Auditors and audit committees
❓ Common questions
What are the new thresholds for divergence disclosure from FY2023-24?
For commercial banks, additional NPA provisioning exceeding 5% of reported profit before provisions and contingencies, or additional gross NPAs exceeding 5% of reported incremental gross NPAs, triggers disclosure. For UCBs, the provisioning threshold is also 5%, but the incremental gross NPA threshold is 15% (subject to review).
Are Regional Rural Banks (RRBs) covered by these directions?
No, RRBs are explicitly excluded from these disclosure requirements. The directions apply to all commercial banks (excluding RRBs) and all Primary (Urban) Co-operative Banks.
When do these revised thresholds take effect?
The revised thresholds apply to annual financial statements for the year ending March 31, 2024, and onwards. For FY2022-23, the earlier thresholds (10% for commercial banks, 15% for UCBs incremental NPAs) remain in effect.
📜 Read the original circular — full text as issued by RBI
RBI/2022-23/130
DOR.ACC.REC.No.74/21.04.018/2022-23
October 11, 2022
Madam / Dear Sir,
Reserve Bank of India (Financial Statements - Presentation and Disclosures) Directions, 2021 - Disclosure of Divergence in Asset Classification and Provisioning
In terms of paragraph C.4(e) of Annexure III to the Reserve Bank of India (Financial Statements-Presentation and Disclosures) Directions, 2021 , commercial banks (excluding Regional Rural Banks (RRBs)) are required to disclose details of divergence in asset classification and provisioning where such divergence assessed by the Reserve Bank of India (RBI) exceeds certain specified thresholds. In order to strengthen compliance with income recognition, asset classification and provisioning norms, it has now been decided to introduce similar disclosure requirements for Primary (Urban) Co-operative Banks (UCBs) and revise the specified thresholds for commercial banks.
2. Accordingly, for the financial statements for the year ending March 31, 2023, banks shall make suitable disclosures in the manner specified in paragraph C.4(e) of Annex III to the afore-mentioned Directions, if either or both of the following conditions are satisfied:
the additional provisioning for non-performing assets (NPAs) assessed by the RBI exceeds 10 per cent of the reported profit before provisions and contingencies 1 for the reference period; and
the additional Gross NPAs identified by the RBI exceed 10 per cent of the reported 2 incremental Gross NPAs for the reference period.
Provided further that in the case of UCBs the threshold for reported incremental Gross NPAs specified in paragraph 2(b) above shall be 15 per cent, which shall be reduced progressively in a phased manner, after review.
3. The thresholds specified in paragraph (2) above shall be revised for disclosures in annual financial statements for the year ending March 31, 2024, and onwards, as under:
Ref.
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2022-23/130 · issued 11 Oct 2022. The plain-English explanation above is BankPulse’s own independent summary.
Ensure UCBs update their reporting systems to handle the 15% incremental gross NPA threshold for FY2022-23 and prepare for potential reduction.
📜 Compliance
Review your bank's current divergence assessment processes to align with the new lower thresholds from FY2023-24.
Train finance and compliance teams on the revised disclosure requirements in the notes to annual financial statements.
Monitor RBI inspection findings closely to pre-empt any divergence that could trigger mandatory disclosure.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Compliance officer at a bank this circular applies to (All commercial banks (excluding Regional Rural Banks), All Primary (Urban) Co-operative Banks (UCBs), Bank finance and compliance departments, Auditors and audit committees), your first concrete step on “RBI Tightens NPA Divergence Disclosure Norms for Banks and UCBs” is: “Review your bank's current divergence assessment processes to align with the new lower thresholds from FY2023-24.” (RBI issued this 11 Oct 2022).
Circular: RBI/2022-23/130 -- RBI Tightens NPA Divergence Disclosure Norms for Banks and UCBs
Issued: 11 Oct 2022
Action required: Review your bank's current divergence assessment processes to align with the new lower thresholds from FY2023-24.
Action required: Ensure UCBs update their reporting systems to handle the 15% incremental gross NPA threshold for FY2022-23 and prepare for potential reduction.
Action required: Train finance and compliance teams on the revised disclosure requirements in the notes to annual financial statements.
Action required: Monitor RBI inspection findings closely to pre-empt any divergence that could trigger mandatory disclosure.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12401&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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