Reserve Bank of India amends AIFI prudential rules for Chapter VI-A stressed asset resolution plans with 5 percent additional provisioning

The Reserve Bank of India has amended its income recognition, asset classification and provisioning directions for All India Financial Institutions to align them with resolution plans implemented under Chapter VI-A of its stressed asset resolution framework. Borrower accounts that are classified as standard may retain that status when a resolution plan is implemented, and accounts that slipped into non-performing asset status between the occurrence of the calamity and implementation of the plan may be upgraded to standard on implementation. The changes also allow accounts already restructured under the existing framework that later require a Chapter VI-A restructuring to continue to be classified as standard. All India Financial Institutions must hold an additional specific provision of 5 percent of outstanding debt for each borrower covered by a Chapter VI-A resolution plan, over and above applicable prudential provisions and subject to an overall ceiling of 100 percent. Where repeated restructuring is needed under Chapter VI-A, a further 5 percent provision applies for each instance. Interest income on Chapter VI-A resolved accounts may be recognized on an accrual basis, but accounts subject to repeated restructuring must be recognized on a cash basis. The additional specific provisions may be written back once the borrower has repaid at least 20 percent of the outstanding debt after restructuring, without slipping into non-performing asset status and without undergoing another restructuring. If post-restructuring exposure consists only of non-fund-based facilities or cash credit or overdraft, the extra provisions may be reversed after one year if no default occurs, or from the date any default is rectified. The amendments take effect from July 1, 2026.