RBI tightens income recognition rules for RRBs on acquired assets
Regional Rural Banks must reverse unrealised interest on SNFA by Sept 2027 and book realised income as non-interest income from October 2026.
What changed
- Unrealised interest on SNFA cannot be recognised as income upon acquisition
- Such income recognised before Sept 30, 2026 must be reversed by Sept 30, 2027
- Income from SNFA booked as non-interest income when realised; expenses booked when incurred
The read
The RBI has closed a loophole. Regional Rural Banks can no longer book income on stressed assets they take over. From October 1, 2026, any accrued but unrealised interest on a Specified Non-Financial Asset (SNFA) cannot be recognised as income at acquisition. Existing recognised but unrealised amounts must reverse through the profit and loss account by September 30, 2027. Income actually received from an SNFA will be recorded as non-interest income in the year of realisation. Upkeep expenses are expensed when incurred. The directive aligns RRB accounting with prudential norms. It prevents artificial income inflation from assets that may never pay. The verdict: a clean-up of balance sheets, but near-term earnings for weaker RRBs may take a hit.
Key numbers
- Effective date: October 1, 2026
- Reversal deadline: September 30, 2027
Primary source: rbi.org.in