What changed
RBI issued the Reserve Bank of India (Rural Co-operative Banks – Financial Statements: Presentation and Disclosures) Directions, 2025, replacing previous versions. The Directions mandate RCBs to use the balance sheet and P&L formats from the Third Schedule of the Banking Regulation Act, 1949, and comply with ICAI accounting standards as Level I enterprises. They also include new guidance on issues like provisioning for fraud, unreconciled balances, and window dressing.
What it means for you
RCBs must overhaul their financial reporting to align with these standardized formats and disclosure requirements, enhancing transparency and comparability. Banks need to ensure their accounting policies and notes to accounts meet the specified norms, which may require system and process updates. Non-compliance could attract regulatory scrutiny, so timely implementation is critical.
What you must do
- Update financial statement templates to match the Third Schedule formats prescribed in the Directions.
- Review and align accounting policies with ICAI standards, especially AS 5 on net profit/loss and prior period items.
- Ensure all disclosures in notes to accounts comply with Chapter III requirements, including fraud provisioning and unreconciled balances.
- Train finance and compliance teams on the new Directions and their effective date.
- Conduct an internal audit to identify gaps in current reporting vs. new norms and rectify them promptly.
Who it affects
State Co-operative Banks, Central Co-operative Banks, Rural Co-operative Banks' finance and compliance departments, Auditors of RCBs
When do these Directions take effect?
The Directions came into effect on November 28, 2025, the date they were placed on the RBI website.
Which banks are covered under these Directions?
They apply to Rural Co-operative Banks, defined as State Co-operative Banks and Central Co-operative Banks under the NABARD Act, 1981.
Do these Directions override existing accounting standards?
No, they supplement ICAI accounting standards. Banks must comply with both, subject to any specific RBI guidelines.