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LAB Financial Statement Disclosures: Third Amendment 2026

Current · Source: Reserve Bank of India · RBI/2026-27/92 · issued 18 May 2026 · ~1 min read
Quick answerRBI has amended LAB financial statement directions to clarify 'Revenue Reserve' definition and require a new disclosure table for movement of provisions on non-performing investments (NPIs), effective immediately.
The rule, in the simplest words
How it plays out — a real example

Rahul, a branch operations officer in Indore, ensures that the LAB's financial statements accurately reflect the movement of provisions for non-performing investments (NPIs) by adding the new table and updating the reporting system. This increased transparency helps the bank's management and auditors understand the bank's bad investment exposures and make informed decisions.

What changed

The definition of 'Revenue Reserve' in Schedule 2(IV) was updated to exclude amounts retained for depreciation, renewals, asset diminution, or known liabilities. A new paragraph 10(3)(vi) mandates a table showing movement of provisions for non-performing investments (NPIs), with opening balance, additions, write-offs/write-backs, and closing balance.

What it means for you

LABs must now clearly separate revenue reserves from other retained amounts, ensuring consistency with investment portfolio classification rules. The new NPI provision movement table increases transparency on how banks manage bad investment exposures, aligning with broader RBI disclosure norms.

What you must do

Who it affects

Local Area Banks (LABs), LAB finance and compliance departments, Auditors reviewing LAB financial statements

❓ Common questions

When do these amendments take effect?

The directions are effective from the date of issue, May 18, 2026, so LABs must apply them immediately for financial statements prepared after this date.

What exactly is the new NPI provision movement table?

It requires LABs to disclose a table showing the opening balance of provisions for non-performing investments, additions during the year, write-offs or write-backs, and the closing balance, all in ₹ crore.

📜 Read the original circular — full text as issued by RBI
RBI/2026-27/92 DOR.MRG.REC.No.80/21-04-018/2026-27 May 18, 2026 Reserve Bank of India (Local Area Banks – Financial Statements: Presentation and Disclosures) Third Amendment Directions, 2026 Please refer to Reserve Bank of India (Local Area Banks - Financial Statements: Presentation and Disclosures) Directions, 2025, dated November 28, 2025 . 2. On a review, consequent to the issuance of Reserve Bank of India (Local Area Banks - Classification, Valuation, and Operation of Investment Portfolio) Amendment Directions, 2026, and in exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949 (hereinafter called the Act) 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. (i) These Directions shall be called the Reserve Bank of India (Local Area Banks – Financial Statements: Presentation and Disclosures) Third Amendment Directions, 2026. (ii) These Amendment Directions shall come into effect from the date of issue. 4. The Reserve Bank of India (Local Area Banks - Financial Statements: Presentation and Disclosures) Directions, 2025 , are amended as provided below. (i) In the table under paragraph 5(1), notes and instructions for compilation for 'Revenue and Other Reserves' under Schedule 2(IV) shall be substituted by the following, namely: - "The expression 'Revenue Reserve' shall mean any reserve other than Capital Reserve. This item will include all reserves, other than those separately classified. The expression 'reserve' shall not include any amount retained by way of providing for depreciation, renewals, or diminution in value of assets or retained by way of providing for any known liability.". (ii) Paragraph 10(3)(vi) shall be substituted by the following, namely: - "Movement of provisions for non-performing investments (NPIs)”. (Amount in ₹ crore)
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2026-27/92 · issued 18 May 2026. The plain-English explanation above is BankPulse’s own independent summary.
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Who does what — compliance checklist
💻 IT / Systems
  • Ensure your reporting systems capture opening balance, provisions made, write-offs/write-backs, and closing balance for NPI provisions.
📜 Compliance
  • Update your financial statement templates to reflect the revised 'Revenue Reserve' definition in Schedule 2(IV).
  • Add the new 'Movement of provisions for non-performing investments (NPIs)' table under paragraph 10(3)(vi) in annual disclosures.
  • Train finance and compliance teams on the amended disclosure requirements effective from May 18, 2026.
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 (Local Area Banks (LABs), LAB finance and compliance departments, Auditors reviewing LAB financial statements), your first concrete step on “LAB Financial Statement Disclosures: Third Amendment 2026” is: “Update your financial statement templates to reflect the revised 'Revenue Reserve' definition in Schedule 2(IV).” (RBI issued this 18 May 2026).

  1. Circular: RBI/2026-27/92 -- LAB Financial Statement Disclosures: Third Amendment 2026
  2. Issued: 18 May 2026
  3. Action required: Update your financial statement templates to reflect the revised 'Revenue Reserve' definition in Schedule 2(IV).
  4. Action required: Add the new 'Movement of provisions for non-performing investments (NPIs)' table under paragraph 10(3)(vi) in annual disclosures.
  5. Action required: Ensure your reporting systems capture opening balance, provisions made, write-offs/write-backs, and closing balance for NPI provisions.
  6. Action required: Train finance and compliance teams on the amended disclosure requirements effective from May 18, 2026.
  7. Owner: ____________ Target date: ____________
  8. Board/committee approval needed? Y / N
  9. 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.

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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=13459&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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