The amendment establishes mandatory accounting and income recognition rules for local area banks' treatment of non-financial assets, which constitutes regulatory reporting obligations on prescribed accounting formats and thresholds.
Mandatory inheritance: Regulatory Reporting is a child of Supervision, so Supervision must be raised as the secondary tag.
Product
This update concerns accounting and income recognition rules for local area banks' non-financial asset holdings, which does not map to any specific retail product type in the taxonomy.
As a fallback, Current Accounts is selected, but this update is fundamentally about regulatory accounting treatment rather than a specific consumer product offering.
Obligation
The amendment establishes mandatory accounting and income recognition rules that local area banks must follow when acquiring and managing specified non-financial assets, requiring specific treatment of accrued interest reversal and income/expense recognition timing, which constitutes a Controls Implementation obligation around financial reporting processes.
The amendment also imposes recordkeeping and reversal obligations requiring banks to track and reverse previously recognised income through their profit and loss accounts by a specified deadline, which involves creation and retention of records evidencing financial transactions and adjustments.
Activity
The update concerns accounting and income recognition rules for local area banks' non-financial asset acquisitions, which relates tangentially to Interest and Fee Management as it governs how interest income must be recognised and reversed.
The update also touches on asset classification and provisioning governance, which relates to Credit Risk Assessment as it affects how banks must classify and account for credit exposures.
Themes
The amendment establishes accounting and provisioning rules for local area banks' treatment of non-financial asset income recognition, which relates to prudential safety-and-soundness requirements for regulated institutions.
The income recognition and asset classification provisions also touch on credit-risk management through provisioning rules, though the update is primarily accounting-focused rather than credit-underwriting focused.
Functions
The amendment directly impacts how local area banks must account for income recognition and asset classification related to non-financial assets, requiring finance and treasury functions to revise their accounting treatment and profit-and-loss reversal processes.
Compliance functions must monitor adherence to the new income recognition and provisioning rules and ensure timely implementation of the September 30, 2027 reversal deadline, though this is a supporting rather than primary obligation warranting human review.
2026-07-17 13:02:44·pthandapani@vixio.com
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Notifications - Reserve Bank of India
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TITLE: India's Reserve Bank Issues Second Amendment Directions on Local Area Banks' Income Recognition
BODY:
On July 16, 2026, the Reserve Bank of India (RBI) issued the Reserve Bank of India (Local Area Banks – Income Recognition, Asset Classification and Provisioning) Second Amendment Directions, 2026. The amendment modifies provisions governing how local area banks must recognise and account for income related to specified non-financial assets (SNFA).
The amendment introduces new provisions in Chapter V of the directions, specifically sections 119C and 119D, which establish rules for income recognition in cases of SNFA acquisition. Under section 119C, banks must not recognise accrued but unrealised interest and charges from extinguished exposures relating to periods prior to SNFA acquisition as income upon acquisition. For any such income already recognised on the books of a bank as of September 30, 2026, the bank must reverse it through its profit and loss account by September 30, 2027, to the extent it remains unrealised on that date. Section 119D requires banks to recognise income received from an SNFA in the income statement as non-interest or other income in the financial year in which it is realised. Similarly, expenses incurred towards upkeep of an SNFA must be accounted for in the income statement in the financial year in which they are incurred.
The amendment applies to local area banks operating under RBI supervision and affects how these institutions manage their accounting treatment of non-financial assets. The RBI issued the directions under sections 21 and 35A of the Banking Regulation Act, 1949. The amendment comes into force with effect from October 1, 2026.
Notifications - Reserve Bank of India Skip to main content Selected Selected Change Language हिंदी Search the Website Search Notifications ( 445 kb ) Reserve Bank of India (Local Area Banks – Income Recognition, Asset Classification and Provisioning) Second Amendment Directions, 2026 RBI/2026-27/202 DOR.STR.REC.167/21-04-048/2026-27 July 16, 2026 Reserve Bank of India (Local Area Banks – Income Recognition, Asset Classification and Provisioning) Second Amendment Directions, 2026 Please refer to Reserve Bank of India (Local Area Banks – Resolution of Stressed Assets) Second Amendment Directions, 2026 dated July 16, 2026 . 2. Consequent to the aforesaid Amendment Directions, in exercise of the powers conferred by the sections 21 and 35A of the Banking Regulation Act, 1949 and all other laws enabling the Reserve Bank in this regard, the Reserve Bank being satisfied that it is necessary and expedient in the public interest so to do, hereby issues the Amendment Directions hereinafter specified. 3. These Amendment Directions modify the Directions as under: (i) The following shall be inserted in Chapter V – Income Recognition: “E1. Income Recognition in case of acquisition of Specified Non-Financial Assets (SNFA) 119C. Any accrued but unrealised interest and / or charges from the extinguished exposure pertaining to periods prior to acquisition of an SNFA, shall not be recognised as income upon acquisition of the SNFA. Where such income has been recognised in respect of any SNFA outstanding in the books of a bank as on September 30, 2026, it shall be reversed through Profit and Loss account, latest by September 30, 2027, to the extent remaining unrealised as on that date. 119D. Any income received from an SNFA shall be recognised in the income statement as ‘non-interest / other income’, in the financial year in which it is realised. Similarly, any expense incurred towards upkeep of an SNFA shall be accounted for in the income statement in the financial year in which it is incurred.” 4. The above amendment would come into force with effect from October 01, 2026. (Vaibhav Chaturvedi) Chief General Manager 2026 All Months January February March April May June July August September October November December 2025 All Months January February March April May June July August September October November December 2024 All Months January February March April May June July August September October November December 2023 All Months January February March April May June July August September October November December 2022 All Months January February March April May June July August September October November December 2021 All Months January February March April May June July August September October November December 2020 All Months January February March April May June July August September October November December 2019 All Months January February March April May June July August September October November December 2018 All Months January February March April May June July August September October November December 2017 All Months January February March April May June July August September October November December Archives 2016 All Months January February March April May June July August September October November December 2015 All Months January February March April May June July August September October November December 2014 All Months January February March April May June July August September October November December 2013 All Months January February March April May June July August September October November December 2012 All Months January February March April May June July August September October November December 2011 All Months January February March April May June July August September October November December 2010 All Months January February March April May June July August September October November December 2009 All Months January February March April May June July August September October November December 2008 All Months January February March April May June July August September October November December 2007 All Months January February March April May June July August September October November December 2006 All Months January February March April May June July August September October November December 2005 All Months January February March April May June July August September October November December 2004 All Months January February March April May June July August September October November December 2003 All Months January February March April May June July August September October November December 2002 All Months January February March April May June July August September October November December 2001 All Months January February March April May June July August September October November December 2000 All Months January February March April May June July August September October November December 1999 All Months January February March April May June July August September October November December 1998 All Months January February March April May June July August September October November December 1997 All Months January February March April May June July August September October November December 1996 All Months January February March April May June July August September October November December 1995 All Months January February March April May June July August September October November December 1994 All Months January February March April May June July August September October November December 1993 All Months January February March April May June July August September October November December 1992 All Months January February March April May June July August September October November December 1991 All Months January February March April May June July August September October November December Top Back to previous page