NEW DELHI, July 16 (ANI): The Reserve Bank of India (RBI) has issued final guidelines for commercial banks, small finance banks (SFBs), and non-banking financial companies (NBFCs), directing them not to recognize unrealized interest and charges as income when they acquire specified non-financial assets (SNFAs) through the resolution of stressed loans.
The guidelines follow the finalization of the Prudential Norms on Specified Non-Financial Assets after the RBI reviewed stakeholder feedback on draft directions issued on May 5, 2026. The amended rules will take effect on Oct. 1.
“Any accrued but unrealized interest and/or charges from the extinguished exposure pertaining to periods prior to acquisition of an SNFA shall not be recognized as income upon acquisition of the SNFA,” the RBI said.
Under the revised income recognition framework, any accrued but unrealized interest and charges related to the extinguished loan exposure before the acquisition of an SNFA cannot be recognized as income after the asset is acquired.
The central bank also directed that if such unrealized income has already been recognized for any SNFA outstanding in the books of commercial banks, small finance banks, or NBFCs as of Sept. 30, 2026, it must be reversed through the profit and loss account by Sept. 30, 2027, to the extent it remains unrealized on that date.
The RBI also clarified the accounting treatment for income and expenses related to these assets.
It said any income received from an SNFA should be recognized as “non-interest/other income” in the financial year in which it is actually realized.
Similarly, any expenses incurred for the maintenance of an SNFA should be recognized in the income statement during the financial year in which they are incurred.
The directions have been issued through amendments to the Income Recognition, Asset Classification, and Provisioning (IRACP) framework for commercial banks, small finance banks, and NBFCs, following the issuance of the amended Resolution of Stressed Assets Directions, 2026.
The RBI said the changes are intended to ensure uniform prudential treatment and accounting practices for specified non-financial assets acquired during the resolution of stressed loans across regulated entities.
The amended framework applies to commercial banks, small finance banks, and non-banking financial companies that acquire immovable assets in settlement of claims against defaulting borrowers as part of the resolution process.
According to the RBI, the revised guidelines will strengthen prudential norms by ensuring that only realized income from such acquired assets is recognized in financial statements, while unrealized interest or charges related to the original stressed exposure are not treated as income.
The amended directions will take effect on Oct. 1, 2026. (ANI)
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