TITLE: India's Reserve Bank Issues Second Amendment Directions on Urban Cooperative Banks' Income Recognition
BODY:
On July 16, 2026, the Reserve Bank of India (RBI) issued the Reserve Bank of India (Urban Cooperative Banks – Income Recognition, Asset Classification and Provisioning) Second Amendment Directions, 2026, modifying existing regulatory requirements for urban cooperative banks. The amendment introduces new provisions governing income recognition in cases involving the acquisition of Specified Non-Financial Assets (SNFA).
The amendment establishes that accrued but unrealised interest and charges from extinguished exposures relating to periods prior to SNFA acquisition shall not be recognised as income upon acquisition. For any such income already recognised on the books of a bank as of September 30, 2026, urban cooperative banks must reverse it through the Profit and Loss account by September 30, 2027, to the extent it remains unrealised on that date. Additionally, the amendment specifies that income received from an SNFA must be recognised in the income statement as non-interest or other income in the financial year in which it is realised. Similarly, expenses incurred for upkeep of an SNFA must be accounted for in the income statement in the financial year in which they are incurred.
The RBI issued these directions under sections 20, 21 and 35A read with section 56 of the Banking Regulation Act, 1949, exercising its regulatory authority over urban cooperative banks. The amendment applies to all urban cooperative banks operating in India and directly affects their accounting practices and financial reporting standards.
The amendment comes into force with effect from October 1, 2026. Urban cooperative banks must ensure compliance with these new income recognition requirements by the specified effective date.