What changed
RBI issued the Reserve Bank of India (Local Area Banks – Financial Statements: Presentation and Disclosures) Directions, 2025, effective immediately from November 28, 2025. These Directions consolidate and update the format and disclosure requirements for LABs' balance sheets and profit and loss accounts, referencing the Third Schedule of the Banking Regulation Act, 1949. They also require strict compliance with the Companies (Accounting Standards) Rules, 2021, subject to RBI guidelines.
What it means for you
Local Area Banks must now align their financial statements with the specified formats in the Third Schedule and follow updated compilation instructions. This ensures uniformity and transparency in reporting, reducing ambiguity. Banks need to review their current reporting practices to ensure compliance with the new Directions and the latest Accounting Standards.
What you must do
- Review the new Directions and update your bank's financial statement formats to match the Third Schedule of the Banking Regulation Act, 1949.
- Ensure compliance with the Companies (Accounting Standards) Rules, 2021, as amended, for all accounting treatments.
- Train your finance and compliance teams on the specific disclosure requirements and compilation instructions in the Directions.
- Update internal policies and reporting templates to reflect the changes effective from November 28, 2025.
Who it affects
Local Area Banks (LABs), Finance and accounting departments of LABs, Compliance officers at LABs, Auditors of LABs
When do these Directions come into effect?
The Directions come into force with immediate effect from November 28, 2025.
Which banks are covered under these Directions?
These Directions apply to all Local Area Banks (LABs) as defined by RBI.
What is the key change in financial statement format?
LABs must now prepare their balance sheet and profit and loss account in the Forms set out in the Third Schedule of the Banking Regulation Act, 1949, as specified by the Government of India.