RBI Enhances Prudential Regulation for Commercial Banks
The Reserve Bank of India has taken a significant step to strengthen the financial sector by revising the Commercial Banks—Credit Facilities framework. The Second Amendment Directions, 2026, aim to enhance prudential regulation, improve asset quality assessment, and ensure timely identification of stressed assets.
- The amendments mandate that loan assets be classified and provisioning requirements follow the 2026 Asset Classification, Provisioning and Income Recognition Directions.
- Project finance accounts can now be classified as Non-Performing Assets (NPAs) before the Date of Commencement of Commercial Operations (DCCO), based on actual recovery records.
- Exposures will attract risk weights and provisioning in accordance with updated credit risk and provisioning directions, ensuring consistency across regulatory frameworks.
These changes will come into effect from April 1, 2027, and are expected to have a positive impact on the financial sector. As such, it is essential for commercial banks to be aware of these amendments and ensure compliance to avoid any potential risks or penalties.
The Reserve Bank of India issued the Second Amendment Directions, 2026 to revise the Commercial Banks—Credit Facilities framework in alignment with updated asset classification and provisioning norms. The amendments mandate that classification of loan assets and provisioning requirements strictly follow the 2026 Asset Classification, Provisioning and Income Recognition Directions. A key change allows project finance accounts to be classified as Non-Performing Assets (NPAs) even before the Date of Commencement of Commercial Operations (DCCO), based on actual recovery records, strengthening early risk recognition. Additionally, exposures will now attract risk weights and provisioning in accordance with updated credit risk and provisioning directions, ensuring consistency across regulatory frameworks. Certain provisions have been removed to streamline compliance and eliminate redundancy. These changes aim to enhance prudential regulation, improve asset quality assessment, and ensure timely identification of stressed assets. The amendments will come into force from April 1, 2027.
Reserve Bank of India
RBI/2026-27/25 DOR.STR.REC.13/07-01-001/2026-27 | Date: April 27, 2026
Reserve Bank of India (Commercial Banks — Credit Facilities) Second Amendment Directions, 2026
Please refer to Reserve Bank of India (Commercial Banks — Credit Facilities) Directions, 2025 (hereinafter referred to as ‘the Directions’).
2. Consequent to the issuance of Reserve Bank of India (Commercial Banks – Asset Classification, Provisioning and Income Recognition) Directions, 2026 and in exercise of the powers conferred by the section 35A of the Banking Regulation Act, 1949 and all other laws enabling the Reserve Bank in this regard, the Reserve Bank being satisfied that it is necessary and expedient in the public interest so to do, hereby issues the Amendment Directions hereinafter specified.
3. The Amendment Directions shall modify the Directions as below:
(1) The paragraph 25(1) of the Directions shall be modified as below:
“Asset classification of individual loan assets and consequent provisioning requirement shall be in terms of the Reserve Bank of India (Commercial Banks – Asset Classification, Provisioning and Income Recognition) Directions, 2026.”
(2) The paragraph 84 of the Directions shall be modified as below:
“A project finance account may be classified as NPA during any time before actual DCCO as per record of recovery, in terms of the Reserve Bank of India (Commercial Banks – Asset Classification, Provisioning and Income Recognition) Directions, 2026.”
(3) The paragraph 132 of the Directions shall be modified as below:
“The above exposures shall attract risk weight and provisioning, in terms of the regulatory requirements, as contained in Reserve Bank of India (Commercial Banks Capital Charge for Credit Risk — Standardised Approach) Directions, 2026 and Reserve Bank of India (Commercial Banks – Asset Classification, Provisioning and Income Recognition) Directions, 2026, as amended from time to time.”
(4) The paragraph 172(3)(ii) stands deleted.
4. The above amendments shall come into force from April 01, 2027.
(Vaibhav Chaturvedi) Chief General Manager
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Readers should treat this as a tax and compliance update, not as personal advice.
This article is for general information based on available source information. It should not be considered legal, tax, investment, or financial advice.