Reserve Bank of India amends rural co-operative bank income recognition rules allowing accrual on standard advances and mandating reversal on NPA classification

The Reserve Bank of India issued amendments to its 2025 Income Recognition, Asset Classification and Provisioning Directions for Rural Co-operative Banks, changing how overdue income is recognised for standard advances and setting a clearer requirement to reverse unrealised income when an exposure becomes a non-performing asset (NPA). Under new paragraph 52A, banks may recognise interest, fee, commission and other income on an accrual basis for credit facilities classified as ‘Standard’, without any requirement to make a matching provision, while income on credit facilities that are not ‘Standard’ (including those guaranteed by government) must be recognised on an actual receipt (cash) basis. A new paragraph 58A requires reversal of the entire interest, fees, commission and other income previously accrued and credited to income in past periods if a credit facility (including bills purchased and discounted and those guaranteed by government) becomes an NPA and the income is not realised. The amendments delete paragraphs 52, 53 to 56 and 58 from the 2025 Directions and take effect immediately.