Home › Circulars › RBI/2026-27/35

RBI's 7th Amendment to Bank Financial Statement Directions

Current · Source: Reserve Bank of India · RBI/2026-27/35 · issued 27 Apr 2026 · ~2 min read
Quick answerRBI updated financial statement presentation rules for commercial banks, aligning with new asset classification directions. Key changes include separate disclosure of Stage 1 and 2 provisions, revised interest income computation for certain assets, and auditor qualification exemption for Stage 3 income non-recognition.
The rule, in the simplest words
How it plays out — a real example

Priya, a treasury officer in Indore, updates her bank's balance sheet. She moves the provisions for Stage 1 and Stage 2 gold loans from being subtracted from total advances to a separate line under 'Others' in Schedule 5. This makes the bank's reported net advances higher, but Priya knows it shows more clearly how much money is set aside for possible losses.

What changed

The amendment modifies the Directions to align with the new Asset Classification Directions. It requires Stage 1 and 2 provisions to be shown separately under 'Others' in Schedule 5, not netted from advances. Interest income computation for assets under paragraph 17 of the new classification directions must follow those rules. The broken period interest expense capitalization rule for government securities is deleted. Non-recognition of income on Stage 3 assets will not trigger auditor qualification. Impairment standard for non-banking assets generally applies only when impairment indicators are evident. A transitional arrangement for regulatory capital is inserted.

What it means for you

Banks must update their balance sheet and profit and loss account presentation to reflect the new provisioning and income recognition rules. The separate disclosure of Stage 1 and 2 provisions increases transparency but may impact reported net advances. The deletion of broken period interest capitalization simplifies accounting but could affect investment cost calculations. The auditor qualification exemption reduces compliance burden for Stage 3 income non-recognition. Banks need to ensure systems capture these changes accurately for regulatory reporting.

What you must do

Who it affects

All commercial banks in India, Bank finance and accounting teams, Statutory auditors of banks, Regulatory reporting departments

❓ Common questions

What happens to the broken period interest on government securities?

Banks can no longer capitalize broken period interest as part of investment cost; it must be booked as an expense.

📜 Read the original circular — full text as issued by RBI
RBI/2026-27/35 DOR.STR.REC.15/21-04-018/2026-27 April 27, 2026 Reserve Bank of India (Commercial Banks – Financial Statements: Presentation and Disclosures)- Seventh Amendment Directions, 2026 Please refer to Reserve Bank of India (Commercial Banks – Financial Statements: Presentation and Disclosures) Directions, 2025 (hereinafter referred to as ‘the Directions’). 2. Consequent to the issuance of Reserve Bank of India (Commercial Banks-Asset Classification, Provisioning and Income Recognition) Directions, 2026 and in exercise of the powers conferred by the section 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. 3. The Amendment Directions modify the Directions as under: (1) Under the table titled (1) Instructions for compilation of balance sheet under Chapter-II Balance Sheet and Profit and Loss Account, with regard to Item : Other Liabilities and Provisions (Schedule 5) with Coverage : Others (including provisions), the Note 4 under the column “Notes and Instructions for compilation” shall be modified as below: “Provisions towards assets under Stage 1 and Stage 2 shall not be netted from gross advances and shown separately as ‘Provisions against assets under Stage 1 and Stage 2’ under ‘Others’ in Schedule 5 of the Balance Sheet.” (2) Under the table titled (2) Instructions for compilation for compilation of Profit and Loss Account, with regard to Item : Interest Earned (Schedule 13) with Coverage : Interest / discount on advances / bills, the item (I) under column “Notes and Instructions for compilation” shall be modified to as below: “Includes interest and discount on all types of loans and advances like cash credit, demand loans, overdrafts, export loans, term loans, domestic and foreign bills purchased and discounted (including those rediscounted), overdue interest and interest subsidy, if any, relating to such advances / bills. With regards to assets specified under paragraph 17 of the Reserve Bank of India (Commercial Banks-Asset Classification, Provisioning and Income Recognition) Directions, 2026 , the computation of interest shall be as per aforesaid Directions.” (3) Under the table titled (2) Instructions for compilation for compilation of Profit and Loss Account, with regard to Item : Interest Earned (Schedule 13 ) with Coverage : Income on investments, the item (II) under column “Notes and Instructions for compilation” shall be modified as below: “Includes all income derived from the investment portfolio by way of interest / discount, dividend.” (4) Under the table titled (2) Instructions for compilation of Profit and Loss Account, with regard to Item : Interest Expended (Schedule 15), the Notes item 2 under column “Notes and Instructions for compilation” shall stand deleted. “ While acquiring government and other approved securities, banks should not capitalise the broken period interest paid to seller as part of cost of the investment, but instead book it as an expense .” (5) The Paragraph 6(2)(i) under Accounting Standard 9 – Revenue Recognition , shall be modified as below: “Non-recognition of income by a bank in case of classification to Stage 3/non-performing advances/non-performing investments, in compliance with the regulatory prescriptions of the RBI, shall not attract a qualification by the statutory auditors as this would be in conformity with provisions of the standard, as it recognises postponement of recognition of revenue where collectability of the revenue is significantly uncertain.” (6) Paragraph 6(11)(iii) of Accounting Standard 28 – Impairment of assets shall be modified as below: “The Standard shall generally apply to non-banking assets acquired in settlement of claims only when the indications of impairment of the entity are evident.” (7) Paragraph 10(1) (i) Composition of regulatory capital , shall be modified to insert item 10(1)(i)(a) as below: “ (i)(a) Transitional arrangement as provided under Reserve Bank of India (Commercial Banks-Asset Classification, Provisioning and Income Recognition) Directions, 2026 A bank shall make appropriate disclosures in their financial statements regarding: (1) whether the regulatory transitional arrangement has been applied; and, (2) the impact of such arrangement on the bank’s regulatory capital and leverage ratios, as compared with the bank’s fully loaded capital and leverage ratios had such transitional arrangement not been applied.” (8) Paragraph 10 (3) Investments , shall be modified to insert item 10(3)(x) and 10(3) (xi) as specified below: 10(3)(x) Credit quality of Investment assets that fall under the list of assets specified in paragraph 17 of Reserve Bank of India (Commercial Banks-Asset Classification, Provisioning and Income Recognition) Directions, 2026 (Amounts in ₹ crore)
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2026-27/35 · issued 27 Apr 2026. The plain-English explanation above is BankPulse’s own independent summary.
🧰 Tools — save, print, templates & related
Most relevant forCompliance TeamInternal AuditSenior Management / BoardRisk ManagementData Science / AnalyticsProduct Manager (Digital & Lending)
🛠 Banker’s toolkit — checklists & reply templates →
Related circulars · Department of Regulation
SFB Pillar 3 Disclosure Norms Aligned with BaselUCB Deposit Rate Disclosure & Uniformity Rules UpdatedLAB Deposit Rate Disclosure & Uniformity Rules TightenedPayments Banks: Interest Rates Must Match Disclosed ScheduleRBI Updates Bulk Deposit Rate Rules and Disclosure Timing
Browse all departments →
Who does what — compliance checklist
💰 Credit
  • Revise interest income computation for assets under paragraph 17 of the 2026 Asset Classification Directions.
💻 IT / Systems
  • Remove broken period interest capitalization from government security acquisition costs.
  • Implement transitional arrangement for regulatory capital as per the new directions.
📜 Compliance
  • Update balance sheet Schedule 5 to show Stage 1 and 2 provisions separately under 'Others'.
  • Ensure auditors are aware of the exemption for Stage 3 income non-recognition.
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 in India, Bank finance and accounting teams, Statutory auditors of banks, Regulatory reporting departments), your first concrete step on “RBI's 7th Amendment to Bank Financial Statement Directions” is: “Update balance sheet Schedule 5 to show Stage 1 and 2 provisions separately under 'Others'.” (RBI issued this 27 Apr 2026).

  1. Circular: RBI/2026-27/35 -- RBI's 7th Amendment to Bank Financial Statement Directions
  2. Issued: 27 Apr 2026
  3. Action required: Update balance sheet Schedule 5 to show Stage 1 and 2 provisions separately under 'Others'.
  4. Action required: Revise interest income computation for assets under paragraph 17 of the 2026 Asset Classification Directions.
  5. Action required: Remove broken period interest capitalization from government security acquisition costs.
  6. Action required: Ensure auditors are aware of the exemption for Stage 3 income non-recognition.
  7. Action required: Implement transitional arrangement for regulatory capital as per the new directions.
  8. Owner: ____________ Target date: ____________
  9. Board/committee approval needed? Y / N
  10. 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.

Loading comments…
BankPulse Compliance Evidence Pack — generated 02 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=13393&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.
Public beta — plain-English informational summaries. Always verify against the official RBI source (circular number cited on every page) before making compliance, credit, treasury, audit, or operational decisions. · Join our WhatsApp channel ↗
—