RBI’s 2026 IRAC Amendments for Urban Cooperative Banks: Calamity-Linked Relief with Strict Provisioning

The Reserve Bank of India has notified the Reserve Bank of India (Urban Cooperative Banks – Income Recognition, Asset Classification and Provisioning) Amendment Directions, 2026, which significantly recalibrate how Urban Cooperative Banks (UCBs) will deal with asset classification, provisioning and income recognition for borrower accounts affected by notified calamities.

These changes, effective July 1, 2026, are directly linked to the calamity-related resolution framework introduced under Chapter IV-A of the Reserve Bank of India (Urban Cooperative Banks – Resolution of Stressed Assets) Directions, 2025 dated November 28, 2025.

At a broad level, the amendments seek to:

  • Allow certain calamity-impacted borrower accounts to retain or regain ‘Standard’ classification after restructuring;
  • Mandate additional specific provisioning of 5% per restructuring instance, capped at 100% of the outstanding debt;
  • Prescribe accrual-based interest recognition for most such restructured accounts, and cash-based interest recognition for specific repeatedly restructured cases;
  • Provide clear conditions for reversal of additional provisions once the borrower demonstrates satisfactory repayment behaviour.

This framework aims to strike a balance between regulatory relief for genuine calamity-affected borrowers and prudential safeguards for the banking system.

The Amendment Directions refer back to the:

“Reserve Bank of India (Urban Cooperative Banks – Resolution of Stressed Assets) Amendment Directions, 2026 dated April 29, 2026.”

In exercise of powers under:

  • Section 20
  • Section 21
  • Section 35A read with Section 56

of the Banking Regulation Act, 1949, and other enabling provisions, the Reserve Bank of India has modified the existing IRAC Directions for UCBs.

The central bank recorded its satisfaction that such modifications are necessary and expedient in the public interest, especially in the context of calamity-induced stress among borrowers.

Key Structural Changes in the Directions

The Amendment Directions make four principal sets of changes:

  1. Deletion of certain existing paragraphs;
  2. Insertion of new paragraphs 53A and 53B on asset classification of calamity-related restructured accounts;
  3. Insertion of a new sub-chapter B1 in Chapter IV on additional specific provisioning (89A to 89D);
  4. Insertion of new paragraphs 11A and 11B in Chapter V on income recognition for such accounts.

Each of these is discussed in detail below.

Asset Classification Relief for Calamity-Affected Restructured Accounts

New Paragraph 53A – Treatment of Accounts Restructured under Chapter IV-A

Under newly inserted paragraph 53A, the asset classification of borrower accounts that undergo a resolution plan in accordance with Chapter IV-A of the Reserve Bank of India (Urban Cooperative Banks – Resolution of Stressed Assets) Directions, 2025 receives special regulatory treatment.

1. Retention of ‘Standard’ Status

Where a borrower account is:

  • Classified as ‘Standard’; and
  • A resolution plan is implemented strictly as per Chapter IV-A,

then:

  • The account may continue to be treated as ‘Standard’ on implementation of the resolution plan, despite the restructuring.

2. Upgradation of Accounts that Slipped to NPA Due to Calamity

If:

  • A borrower account was ‘Standard’ prior to the calamity;
  • It slipped into NPA between the date of occurrence of the calamity and the date of implementation of the resolution plan; and
  • The restructuring is carried out under Chapter IV-A,

then:

  • The account shall be upgraded to ‘Standard’ classification upon implementation of the resolution plan.

Important:
After implementation, the subsequent asset classification of such accounts will follow the ordinary IRAC norms contained in the Directions. The special relief is restricted to the point of implementation.

New Paragraph 53B – Repeated Restructuring Linked to Calamity