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IRAC Norms Tweaked for Stressed Asset Resolution Plans

Current · Source: Reserve Bank of India · RBI/2026-27/45 · issued 29 Apr 2026 · ~2 min read
Quick answerRBI has amended IRAC norms to align with new stressed asset resolution rules. Standard accounts under a resolution plan can stay standard; NPAs can be upgraded upon plan implementation. Banks must now set aside 5% additional provisioning for such plans, with write-back conditions.
The rule, in the simplest words
How it plays out — a real example

A credit & lending officer in Mumbai, Priya, has a customer whose business was hit by floods. The loan slipped into NPA. Under the new rule, Priya can offer a resolution plan to help the customer, and once the plan is signed, she can upgrade the loan back to 'Standard'. But she must also set aside an extra 5% of the loan amount as a provision, which she tracks carefully until the customer repays 20% of the debt.

What changed

RBI deleted paragraphs 57(4) and 80(6) from the IRAC Directions, and inserted new paragraphs 62A, 62B, and 84A-84D. These changes allow standard accounts under a resolution plan to retain their classification, and NPAs to be upgraded upon plan implementation. New additional specific provisioning of 5% is mandated for such resolution plans, with specific write-back rules.

What it means for you

Banks can now offer resolution plans without forcing an automatic NPA downgrade for standard accounts, and can upgrade NPAs that were restructured due to a calamity. However, the 5% additional provisioning will hit profitability, especially for repeated restructurings. The write-back conditions are strict—requiring 20% repayment or one-year clean track record for non-fund/cash credit facilities.

What you must do

Who it affects

All commercial banks in India, Credit and risk management teams, Loan recovery and restructuring departments, Borrowers with stressed assets under resolution plans

❓ Common questions

When can the additional specific provision be written back?

The provision can be written back if the borrower pays at least 20% of the outstanding debt without slipping into NPA post-restructuring and without being subjected to another restructuring. For non-fund or cash credit facilities, it can be reversed after one year post-restructuring, provided the borrower was not in default at any point during that period; if default occurs, conditions are tested from the date of rectification.

📜 Read the original circular — full text as issued by RBI
RBI/2026-27/45 DOR.STR.REC.34/21-04-048/2026-27 April 29, 2026 Reserve Bank of India (Commercial Banks – Income Recognition, Asset Classification and Provisioning) Amendment Directions, 2026 Please refer to Reserve Bank of India (Commercial Banks – Resolution of Stressed Assets) Second Amendment Directions, 2026 dated April 29, 2026 . 2. Consequent to the aforesaid Amendment Directions, in exercise of the powers conferred by the sections 21 and 35A of the Banking Regulation Act, 1949 and all other laws enabling the Reserve Bank of India (hereinafter called 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. These Amendment Directions modify the Directions as under: i. Paragraph 57(4) shall be deleted. ii. Paragraph 62A and 62B shall be inserted as under: 62A. If a resolution plan is implemented in adherence to the provisions of Chapter VI-A of Reserve Bank of India (Commercial Banks – Resolution of Stressed Assets) Directions, 2025 dated November 28, 2025 , borrower accounts which are classified as ‘Standard’ may be retained as such upon implementation. Borrower accounts which may have slipped into NPA between the date of occurrence of the calamity and implementation of the resolution plan, shall be upgraded as ‘Standard’, upon implementation of the resolution plan. Provided that after implementation of the resolution plan, the subsequent asset classification shall be governed by the criteria laid out in these Directions. 62B. Accounts which are restructured under paragraphs 124I to 124Q of the Reserve Bank of India (Commercial Banks – Resolution of Stressed Assets) Directions, 2025 dated November 28, 2025 , where a subsequent restructuring is necessitated under the provisions of Chapter VI-A of the afore-mentioned Directions, shall continue to be classified as ‘Standard’. iii. Para 80(6) shall be deleted. iv. The following shall be inserted in Chapter IV - Provisioning Norms B1. Additional specific provisioning in case of resolution plan implemented under Chapter VI-A of the Reserve Bank of India (Commercial Banks – Resolution of Stressed Assets) Directions, 2025 84A. A bank shall make an additional specific provision of five percent of the outstanding debt in respect of borrowers, for whom a resolution plan has been implemented in terms of Chapter VI-A of the Reserve Bank of India (Commercial Banks – Resolution of Stressed Assets) Directions, 2025 . The additional specific provisions shall be over and above the applicable prudential provisions subject to a ceiling of hundred per cent. 84B. For accounts where repeated restructuring is necessitated in terms of Chapter VI-A of the Reserve Bank of India (Commercial Banks – Resolution of Stressed Assets) Directions, 2025 , a bank shall make additional specific provisioning of five per cent of the outstanding debt for each instance of restructuring made under the afore-mentioned Directions. This additional specific provisioning shall be over and above the applicable prudential provisions subject to a ceiling of hundred per cent. 84C. The additional specific provisions maintained in terms of paragraph 84A and 84B above may be written back upon the borrower paying at least 20% of the outstanding debt with the bank, without slipping into NPA post implementation of the restructuring, and without being subjected to another restructuring. 84D. If the outstanding debt post-restructuring is only in the form of non-fund-based facilities or facilities in the nature of cash credit / overdraft, the additional specific provisions made in terms of paragraph 84A and 84B above can be reversed after one year, post implementation of the restructuring, provided the borrower was not in default at any point of time during the period concerned. In case the borrower defaults during the above period, the conditions for reversal of additional specific provisions, mentioned above, shall be tested from the date of rectification of default. v. The following shall be inserted in part E, Chapter V – Income Recognition: 139A. Interest income recognition in respect of borrower accounts where resolution plan has been implemented in terms of Chapter VI-A of the Reserve Bank of India (Commercial Banks – Resolution of Stressed Assets) Directions, 2025 dated November 28, 2025 , shall be on accrual basis. 139B. For accounts specified at paragraph 62B of these Directions, interest income shall be recognized on cash basis. 4. The above amendment shall come into force with effect from July 1, 2026. (Vaibhav Chaturvedi) Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2026-27/45 · issued 29 Apr 2026. The plain-English explanation above is BankPulse’s own independent summary.
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Who does what — compliance checklist
💰 Credit
  • Train credit and risk teams on the new asset classification rules for resolution plans under Chapter VI-A of the Stressed Assets Directions.
  • Set up a tracking mechanism for additional specific provisioning of 5% on all resolution plans implemented under Chapter VI-A.
  • Review existing resolution plan portfolios to identify accounts that may need reclassification or additional provisioning.
📜 Compliance
  • Update internal IRAC policies to reflect deletion of paras 57(4) and 80(6) and insertion of new paras 62A, 62B, and 84A-84D.
  • Monitor borrower repayment and default status to ensure timely write-back of additional provisions under the prescribed conditions.
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, Credit and risk management teams, Loan recovery and restructuring departments, Borrowers with stressed assets under resolution plans), your first concrete step on “IRAC Norms Tweaked for Stressed Asset Resolution Plans” is: “Update internal IRAC policies to reflect deletion of paras 57(4) and 80(6) and insertion of new paras 62A, 62B, and 84A-84D.” (RBI issued this 29 Apr 2026).

  1. Circular: RBI/2026-27/45 -- IRAC Norms Tweaked for Stressed Asset Resolution Plans
  2. Issued: 29 Apr 2026
  3. Action required: Update internal IRAC policies to reflect deletion of paras 57(4) and 80(6) and insertion of new paras 62A, 62B, and 84A-84D.
  4. Action required: Train credit and risk teams on the new asset classification rules for resolution plans under Chapter VI-A of the Stressed Assets Directions.
  5. Action required: Set up a tracking mechanism for additional specific provisioning of 5% on all resolution plans implemented under Chapter VI-A.
  6. Action required: Monitor borrower repayment and default status to ensure timely write-back of additional provisions under the prescribed conditions.
  7. Action required: Review existing resolution plan portfolios to identify accounts that may need reclassification or additional provisioning.
  8. Owner: ____________ Target date: ____________
  9. Board/committee approval needed? Y / N
  10. Evidence filed in compliance register on: ____________
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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=13409&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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