What changed
RBI consolidated and updated the Income Recognition, Asset Classification, and Provisioning (IRAC) directions for Urban Co-operative Banks (UCBs) into a single comprehensive directive effective November 28, 2025. The new directions define key terms like 'doubtful asset' (substandard for 12 months) and 'crop season' as per SLBC determination. They also mandate UCBs to follow the separate stressed asset resolution directions for restructured accounts.
What it means for you
UCBs now have a unified, clearer framework for classifying assets and provisioning, reducing ambiguity. The explicit linkage to stressed asset resolution directions means banks must integrate both sets of rules for restructured loans. Stricter state-level laws continue to apply, so UCBs operating in multiple states need to ensure compliance with the highest standard.
What you must do
- Review and update your bank's asset classification and provisioning policies to align with the new 2025 IRAC directions.
- Ensure your systems can track the 12-month substandard period for classifying assets as doubtful.
- Cross-check state co-operative society laws for any stricter requirements and apply the more stringent norm.
- Train credit and risk teams on the new definitions, especially for crop seasons and long-duration crops.
- Integrate the stressed asset resolution directions for all restructured accounts as mandated.
Who it affects
Urban Co-operative Banks (Primary Co-operative Banks), Risk management and credit departments of UCBs, Internal and external auditors of UCBs, State Level Bankers' Committees (SLBCs) for crop season definitions
What is the effective date of these new IRAC directions for UCBs?
The directions came into force with immediate effect from November 28, 2025, the date of issuance.
Do these directions override state co-operative society laws?
No. Banks must follow the requirements of State Co-operative Societies Acts or rules if they are more stringent than these RBI directions.
How is a 'doubtful asset' defined under the new directions?
A doubtful asset is one that has remained in the substandard category for a period of twelve months.