What does this RBI rule cover?

This paper sets when a loan turns bad for urban co-operative banks. Any sum not paid on its due date is overdue.

Who does this RBI rule apply to?

These Directions apply to every urban co-operative bank. An urban co-operative bank means a Primary Co-operative Bank under the Banking Regulation Act.

What are the main requirements for urban co-operative banks?

A doubtful asset is one that has stayed substandard for 12 months. A substandard asset is one that has been an NPA for up to 12 months. An account overdue for thirty days is tagged SMA-1 at that day's run. An account overdue past SMA-1 is tagged SMA-2 at the next month's day-end run.

When does this RBI rule take effect?

A stock statement used for drawing power must not be older than three months. These Directions came into effect on the day RBI issued them.

Which earlier RBI rules does this replace?

This document cancels the older income recognition and provisioning rules for Commercial Banks. Penalties and legal cases already started under the old rules still continue.

Has this RBI rule been amended?

Yes. It was issued on Nov 28, 2025 and changed on Apr 29, 2026, Jul 16, 2026. The points on this page are the rule as it stands after every one of those changes.

Directions · Reserve Bank of India

Reserve Bank of India (Urban Co-operative Banks – Income Recognition, Asset Classification and Provisioning) Directions, 2025 (updated as on July 01, 2026)

Applies toUrban co-operative banks
StatusIn force
ImportanceMUST READ
IssuedNov 28, 2025
Last amendedJul 16, 2026 · 2 incorporated
Length28 points in 5 sections · 3 min read

The four dates on this rule

PublishedNov 28, 2025The day RBI put this document out.
Starts to applyNot statedNot stated separately in this document. Read the rule itself before you assume a start date.
Time to get readyNot statedCannot be worked out until the day it starts to apply is known.
Last date to actNot statedNo date to act by was found in this document. Other dates may sit inside single paragraphs.

At a glanceThis paper sets when a loan turns bad for urban co-operative banks. These Directions apply to every urban co-operative bank. A stock statement used for drawing power must not be older than three months.

Official RBI page

What it says

Chapter I. Preliminary

Must know

1. Doubtful asset definition

RBI Para 6(2)

A doubtful asset is one that has stayed substandard for 12 months.

2. Substandard asset definition

RBI Para 6(11)

A substandard asset is one that has been an NPA for up to 12 months.

Background

3. Bad loan norms for UCBs

RBI Para 1

This paper sets when a loan turns bad for urban co-operative banks.

4. Start date

RBI Para 2

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

5. Who is covered

RBI Para 3

These Directions apply to every urban co-operative bank.

6. Who an urban bank is

RBI Para 3

An urban co-operative bank means a Primary Co-operative Bank under the Banking Regulation Act.

7. Restructured accounts follow that book

RBI Para 5

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

8. Out of order covers overdrafts

RBI Para 6(7)

The out of order test covers every overdraft product, business or not.

9. Overdue means unpaid on time

RBI Para 6(8)

Any sum not paid on its due date is overdue.

10. Security must be tangible

RBI Para 6(9)

Security means a tangible charge; a guarantee or comfort letter does not count.

11. Short crops defined by exclusion

RBI Para 6(10)

A short duration crop is any crop that is not a long duration crop.

12. Enterprise sizes defined elsewhere

RBI Para 7

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

13. Property terms defined elsewhere

RBI Para 9

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

Chapter II. General Instructions

1. Three months for stock

RBI Para 15(2)

A stock statement used for drawing power must not be older than three months.

2. Name the repayment start

RBI Para 13

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

3. Avoid repeated ad hoc renewals

RBI Para 18

Frequent ad hoc or short renewals without good reason must be avoided.

Chapter III. Asset Classification

Must know

1. Thirty days makes SMA-1

RBI Para 25

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

RBI Para 25

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

Do it

3. Flag at day end

RBI Para 24

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

4. Prove a real cure

RBI Para 45

Where an account is said to be cured, satisfactory evidence must go to the auditors.

5. Fit schedule to cash flow

RBI Para 48(3)

Repayment dates must be set from the borrower's real cash flow.

Background

6. Standard means no problem

RBI Para 23

A standard asset shows no problem and carries no more than normal risk.

7. The calendar date rules

RBI Para 25

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

8. Borrower-level classification

RBI Para 36

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

9. State guarantee does not save

RBI Para 49(1)

A State guaranteed advance still turns bad once dues stay overdue.

10. Plan sets the later grade

RBI Para 53

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

Chapter VI. Repeal and Other Provisions

1. Older rules cancelled

RBI Para 114

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

2. Old cases continue

RBI Para 115

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

What RBI has fined people for under this rulebook

RBI has imposed 11 monetary penalties on this kind of lender. In each one its own stated reason names the subject of this rulebook. Each one links to the press release it was read from.

This tells you the rulebook RBI named. It does not tell you which of the points on this page was broken, because RBI does not say. Read the order itself before drawing any conclusion about your own bank.

Aug 24, 2026. Vikas Souharda Co-operative Bank Limited, Hosapete, Karnataka — ₹1 lakh (Rupees One lakh only). RBI press release
Aug 24, 2026. Shri Vijay Mahantesh Co-operative Bank Limited, Hungund, Karnataka — ₹2.50 lakh (Rupees Two lakh Fifty thousand only). RBI press release
Jul 27, 2026. The Citizen Co-operative Bank Limited, Bangalore, Karnataka — ₹50,000/- (Rupees Fifty Thousand only). RBI press release
Nov 20, 2025. Shri Basaveshwar Sahakari Bank Niyamitha, Bagalkot, Karnataka — ₹1 lakh (Rupees One Lakh only). RBI press release
Oct 30, 2025. Parner Taluka Sainik Sahakari Bank Ltd., Parner, Maharashtra — ₹1 lakh (Rupees One Lakh only). RBI press release
Oct 30, 2025. The Mehsana Urban Co-operative Bank Limited, Gujarat — ₹25 lakh (Rupees Twenty Five Lakh only). RBI press release
Aug 14, 2025. Shree Bharat Co-operative Bank Ltd., Vadodara, Gujarat — ₹2.50 lakh (Rupees Two Lakh Fifty Thousand only). RBI press release
Jul 21, 2025. The Shahada Peoples Co-operative Bank Ltd., Shahada, Maharashtra — ₹2 lakh (Rupees Two Lakh only). RBI press release
May 06, 2025. The Pusad Urban Cooperative Bank Limited, Pusad, Maharashtra — ₹7.50 lakh (Rupees Seven Lakh Fifty Thousand only). RBI press release
Feb 27, 2025. The Lasalgaon Merchants Co-operative Bank Ltd., Nashik, Maharashtra — ₹1.00 lakh (Rupees One Lakh only). RBI press release
Jan 09, 2025. Janata Sahakari Bank Limited, Pune — ₹17.50 lakh (Rupees Seventeen Lakh Fifty Thousand only). RBI press release

These come from RBI press releases. The penalty tracker holds them all. It also lists the penalties we could not place on any rulebook, and the reason for each one.

How this rule has changed

The points above are the rule as it stands today, after every change listed here.

Issued on Nov 28, 2025. This is the date RBI put the rule out.
Changed on Apr 29, 2026.
- Upgrade slipped NPAs. NPAs caused between calamity and plan can be marked standard again when the resolution plan is implemented.
- Post‑plan classification. After the plan, later asset class must follow the normal rules in these Directions.
- Ceiling on extra provision. This extra provision for resolved accounts cannot push total provisions above hundred percent of the exposure.
- Ceiling on repeat provision. Extra provisions for repeat restructuring are over normal rules but capped at hundred percent in total.
Changed on Jul 16, 2026.
- Do not book old interest. Do not treat earlier unpaid interest or charges on a bought Specified Non-Financial Asset as income when you buy it.
- Classify SNFA income. Show money actually received from a Specified Non-Financial Asset as non-interest or other income in that year.
- Book SNFA expenses yearly. Record any upkeep cost of a Specified Non-Financial Asset as an expense in the year you spend it.
- Effective date. These new income and expense rules start applying from October 01, 2026.

The same subject for other kinds of institution

The same subject for other kinds of institution.

Other RBI rules for urban co-operative banks

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