Reserve Bank of India (Commercial Banks - Asset Classification, Provisioning and Income Recognition) Directions, 2026
UR
- Applies toCommercial banks
- StatusIn force from 1 April 2027
- IssuedApr 27, 2026
- Amendmentsnone tracked
- Length44 points in 5 sections · 5 min read
The four dates on this rule
- PublishedApr 27, 2026The day RBI put this document out. This is the same day as the Issued date on this rule.
- Starts to applyApril 1, 2027The day this rule starts to apply, as RBI's own text states it.
- Time to get ready339 daysThe room between the day it was published and the day it starts to apply.
- Last date to actNot statedNo date to act by was found in this document. Other dates may sit inside single paragraphs.
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Numbers to remember
| ninety days | An overdraft or cash credit account stays over its limit for ninety days is also bad. RBI Para 6 |
| twelve months | A bad loan stays graded 'sub-standard' for up to twelve months. RBI Para 10 |
| 30 days | Once a payment is more than 30 days late, risk is presumed to have worsened. RBI Para 33 |
| Rs 7.5 crore | Collateral behind a bad loan over Rs 7.5 crore is revalued at least once every two years. RBI Para 55 |
| 0.03 per cent | The lowest default probability a bank may use for any loan is 0.03 per cent. RBI Para 96 |
| five per cent | A loan to a company with a wilful defaulter as director gets five per cent extra provision. RBI Para 101 |
What it says
How firm is each point
Stated by RBI — RBI’s own paragraph says this. We have only made it plainer.
Our reading — BankPulse read RBI’s paragraph and shortened it. The paragraph is the authority, not this line.
Needs judgement — RBI leaves this to the bank to settle, so nobody can give you a fixed number here.
Can be read two ways
A point marked this way sits on an RBI paragraph that can honestly be read two ways. Our own sentence takes one of the two. BankPulse does not choose for you: read RBI’s own paragraph, at the number printed on the point, before you act on it.
Two ways — both, or either one. RBI’s paragraph joins two things in the and-or form. One reading: Both of them apply, together. The other: Either one of them, on its own, is enough.
Chapter I. Preliminary
1. Starts 1 April 2027
The new rules take effect from 1 April 2027.
2. Old 2025 rules repealed
On the day these rules start, the 2025 rulebook they replace is cancelled.
3. Which banks this covers
This book covers commercial banks, not small finance banks or local area banks.
4. Overdrawn ninety days, also bad
An overdraft or cash credit account stays over its limit for ninety days is also bad.
5. Runs alongside the stress rules
A bank must also follow RBI's separate rulebook for restructuring stressed loans.
Chapter II. Classification as Non-Performing Asset
Must know
1. Ninety days overdue means bad
A term loan becomes a bad loan once interest or principal is ninety days overdue.
2. One bad loan taints all
If one loan to a borrower turns bad, the bank must treat all its loans to them as bad too.
3. Full repayment lifts the tag
A bad loan returns to the healthy list only once every arrear is paid in full.
4. Co-lenders must share one grade
In a co-lending deal, if one lender marks a borrower bad, the other must match it.
5. Term-deposit-backed loans exempt
A loan fully covered by the borrower's own term deposit need not be tagged bad.
6. Margin floor is 100%
The margin covering such a loan may never fall below 100% of the amount owed.
7. Sub-standard means under a year
A bad loan stays graded 'sub-standard' for up to twelve months.
8. Doubtful after twelve months
After twelve months as sub-standard, a bad loan is regraded 'doubtful'.
9. Repayment schedules must be realistic
Loan repayment schedules must be realistic, based on the borrower's actual cash flows.
Chapter III. Expected Credit Loss (ECL) – based Provisioning
Must know
1. Default is 12-month loss
By default, a bank sets aside enough to cover 12-month expected losses.
2. Whole book fair valued
On the day the rules start, a bank must fair value its entire loan book.
3. Old loans move to EIR
Loans already on the books must switch to the new interest method by 31 March 2030.
4. Thirty days triggers higher risk
Once a payment is more than 30 days late, risk is presumed to have worsened.
5. Revolving overdraw of sixty days
A revolving loan over its limit for sixty straight days is presumed to have worsened.
6. ECL is a probability estimate
Expected credit loss is a probability-weighted estimate of losses, not a single guess.
7. Trade debts get lifetime ECL
Trade and lease receivables always carry a lifetime-loss provision, whatever stage they are in.
8. Collateral revalued every two years
Collateral behind a bad loan over Rs 7.5 crore is revalued at least once every two years.
BankPulse example. RBI's own line is redrawn as a simple test, adding no rule of its own. A bad loan of Rs 6 crore does not need this two-yearly revaluation. A bad loan of Rs 8 crore does, because it is over Rs 7.5 crore.
9. Board owns the new system
The bank's own board is responsible for overseeing how the new loss-provisioning system works.
10. CFO and CRO on panel
A board committee including the finance chief and the risk chief must oversee the new system.
11. Loans grouped by shared risk
Loans are grouped by shared risk traits so changes in risk can be tracked properly.
12. Internal audit reports to board
Internal audit must check that the new system works and report straight to the board.
13. Gold loan floor 0.40%-1.50%
A gold loan is provisioned at 0.40% at first, rising to 1.50% if risk grows.
BankPulse example. RBI's own two figures, carried straight through. A bank holding Rs 10 crore of healthy gold loans sets aside Rs 4 lakh (0.40%). If risk on that book rises, the set-aside grows to Rs 15 lakh (1.50%).
14. Unsecured retail floor 1%-5%
An unsecured personal loan is provisioned at 1% at first, rising to 5% if risk grows.
15. Housing loan floor 0.25%-1.50%
A home loan is provisioned at 0.25% at first, rising to 1.50% if risk grows.
16. Old buffers count toward ECL
Existing floating or countercyclical provision buffers may be used toward the new ECL requirement.
17. Default-chance floor set at 0.03%
The lowest default probability a bank may use for any loan is 0.03 per cent.
18. Backstop loss rate 65-70%
Without its own loss data a bank applies a default rate of 65% secured, 70% unsecured.
19. Collateral doesn't shrink EAD
Collateral held against a loan does not reduce the exposure counted at the point of default.
20. Fraud provisioned in full
The moment a fraud is found, the bank must provision the whole amount straight away.
21. Wilful defaulters cost 5% more
A loan to a company with a wilful defaulter as director gets five per cent extra provision.
22. Capital relief ends 2031
Extra capital relief for the switch to ECL runs out by 31 March 2031.
Background
23. Forecasts feed into the number
Banks must weigh today's economy and forecasts, not only past repayment history, when sizing provisions.
Chapter IV. Income Recognition
1. Interest booked by new method
From April 2027, interest on new loans is booked using the effective interest rate method.
2. Bad loan interest, cash only
Interest on a loan already gone bad is booked only when the cash actually arrives.
Chapter VI. Disclosures, Regulatory Reporting and Repeal
1. Write-off policy must be disclosed
Banks must disclose their write-off policy and what signals a loan is unrecoverable.
2. First ECL report, June 2027
Banks first report their books under the new rules as of 30 June 2027.
3. RBI's own reading is final
If there is any doubt, RBI's own reading of these rules is final and binding.
4. Old-style reporting continues meanwhile
Until then, banks must also keep filing quarterly results the old way.
5. Old rights still protected
Cancelling the old rules does not erase rights or duties that already existed under them.
Other RBI rules for commercial banks
RBI compliance officer and compliance function rules for commercial banks 2026
RBI credit card and debit card rules for commercial banks 2025
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