The Reserve Bank of India (RBI) has issued the Reserve Bank of India (Commercial Banks – Asset Classification, Provisioning and Income Recognition) Directions, 2026, applicable to commercial banks and effective from 1 April 2027.

The Directions introduce an Expected Credit Loss (ECL)-based impairment framework along with the Effective Interest Rate (EIR) method for income recognition and measurement of financial assets at amortized cost post-initial recognition. The framework also provides detailed guidance on the staging of financial assets, assessment of Significant Increase in Credit Risk (SICR), model-based provisioning, governance, and related control requirements.

The Directions retain the existing concepts relating to identification and classification of NPAs, including borrower-level NPA classification, aging categories, and reporting requirements. Banks will continue to compute and disclose Gross Advances, Net Advances, Gross NPAs, and Net NPAs in the prescribed format. However, while NPA classification continues from a prudential and reporting perspective, the impairment framework itself now moves away from prescribed provisioning percentages linked to asset classification towards a more forward-looking, risk-based ECL approach.

Although banks are not yet required to adopt Ind AS, the Directions introduce concepts closely aligned with Ind AS 109 / IFRS 9, particularly in impairment, amortized cost measurement, and EIR-based income recognition.