Reserve Bank of India (Non-Banking Financial Companies – Income Recognition, Asset Classification and Provisioning) Directions, 2025 (updated as on July 01, 2026)

1. Bad loan norms for NBFCs

This paper sets when a loan turns bad for non-banking financial companies.

2. Start date

These Directions came into effect on the day RBI issued them.

3. Who is covered

These Directions apply to every non-banking financial company.

4. Housing finance firms covered

These rules cover a housing finance company unless its own rules say otherwise.

5. Its own rules win

Where the housing finance rules clash with these, those rules win.

6. Microfinance firms covered

These rules cover a microfinance company unless its own rules say otherwise.

7. Mortgage guarantee firms covered

These rules cover a mortgage guarantee company unless its own rules say otherwise.

8. Core investment firms covered

These rules cover a core investment company unless its own rules say otherwise.

9. Ind AS firms follow it

A firm on Ind AS stays guided by the standard and the institute's advice.

10. Restructured accounts follow that book

Restructured accounts follow the stressed assets rules for income and grading.

11. Overdue means unpaid on time

Any sum not paid on its due date is overdue.

12. What a standard asset is

A standard asset is one with no default and no more than normal business risk.

13. Wilful defaulter defined elsewhere

A wilful defaulter has the meaning given in the wilful defaulters rules.

14. Enterprise sizes defined elsewhere

Micro, small and medium enterprise are defined by the MSME credit circular.

15. Property terms defined elsewhere

Commercial real estate and project finance take their meaning from the lending rules.

1. Thirty days makes SMA-1

An account overdue for thirty days is tagged SMA-1 at that day's run.

BankPulse example. An instalment falls due on 1 September and is not paid. The account is tagged SMA-1 when 30 days of continuous overdue are complete. That is at the day-end run on 1 October.

2. Sixty days makes SMA-2

An account overdue past SMA-1 is tagged SMA-2 at the next month's day-end run.

3. Name the repayment start

Where there is a moratorium, the loan agreement must name the exact repayment start date.

4. Flag at day end

An account must be flagged overdue in the day-end run for its due date.

5. Stressed rules apply too

Grading must also follow the stressed assets rules where a loan is resolved.

6. The calendar date rules

The SMA or bad loan date is the calendar date of the day-end run.

7. Weakness and collateral both

Assets are graded on credit weakness and on how far recovery leans on collateral.

8. Rescheduling is no cure

An asset does not improve its grade merely because it has been rescheduled.

9. Borrower-level classification

If one loan turns bad, all the borrower's facilities are classified as NPA.

10. Plan sets the later grade

After a resolution plan is put in place, later grading follows these Directions.

1. Older rules cancelled

This document cancels the older income recognition and provisioning rules for Commercial Banks.

2. Old cases continue

Penalties and legal cases already started under the old rules still continue.