RBI · Banking Regulation
RBI orders rural co-op banks to reverse unrealised interest on acquired assets
Rural co-operative banks must reverse unrealised interest on specified non-financial assets by September 2027.
What changed
- No income recognition on accrued interest from extinguished exposure upon SNFA acquisition
- Existing unrealised income on SNFA must be reversed by September 30, 2027
- Income from SNFA to be booked as non-interest income when realised
The read
RBI closed a loophole. From October 1, 2026, rural co-operative banks must stop booking accrued but unrealised interest on exposures extinguished before acquiring a specified non-financial asset. Any such income already recognised must be reversed by September 30, 2027. Banks can only book income from these assets as non-interest income when cash is received. The rule forces conservative provisioning and cleans up balance sheets. For RCBs, this means lower near-term profits but truer asset quality.
Key numbers
- Effective date: October 01, 2026
- Reversal deadline: September 30, 2027
Primary source: rbi.org.in