RBI · Banking Regulation
RBI tightens income recognition norms for local area banks on stressed assets
Banks must reverse unrealised interest on acquired stressed assets by Sep 2027 and treat realised income as non-interest income.
What changed
- Unrealised interest/charges on acquired stressed assets cannot be recognised as income upon acquisition.
- Previously recognised but unrealised accruals must be reversed by September 30, 2027.
- Income from such assets recognised only on realisation as non-interest income.
The read
The Reserve Bank revised income recognition rules for Local Area Banks after allowing them to acquire Specified Non-Financial Assets under stressed asset resolution. The amendment prevents banks from booking income that may never be received, strengthening asset quality reporting. Banks must reverse any previously recognised but unrealised accruals by September 30, 2027, and future income will only be recognised upon realisation as non-interest income. This aligns with conservative provisioning norms. The verdict: LABs face stricter income hit.
Key numbers
- Effective date: October 01, 2026
- Reversal deadline: September 30, 2027
Primary source: rbi.org.in