RBI’s 2026 IRACP Amendments for All India Financial Institutions: Detailed Analysis

The Reserve Bank of India has issued the “All India Financial Institutions – Income Recognition, Asset Classification and Provisioning (IRACP) Amendment Directions, 2026” on April 29, 2026 under Section 45L of the Reserve Bank of India Act, 1934. These amendments substantially recalibrate how All India Financial Institutions (AIFIs) handle stressed accounts, particularly those affected by calamities, and align the income recognition and provisioning framework with the Reserve Bank of India (All India Financial Institutions – Resolution of Stressed Assets) Directions, 2025.

The changes are effective from July 1, 2026, and are intended to strike a balance between regulatory prudence and relief to borrowers facing genuine stress, especially arising from calamity situations.

This article explains the key amendments, their practical implications for AIFIs, and the consequential impact on assessees whose accounts are subject to restructuring or resolution plans.

Background and Regulatory Context

The Amendment Directions are issued following the Reserve Bank of India (All India Financial Institutions – Resolution of Stressed Assets) Amendment Directions, 2026 dated April 29, 2026. The RBI, invoking its powers under Section 45L of the Reserve Bank of India Act, 1934, has concluded that modifying the IRACP framework is necessary in the public interest to ensure consistency with the revised stressed asset resolution architecture.

In effect, the 2026 IRACP amendments:

  • Introduce new provisions (Paragraph 47A and 47B) on asset classification for borrower accounts covered by a resolution plan under Chapter VI-A of the 2025 Directions;
  • Insert a new block of provisions (Paragraphs 68A to 68D) prescribing additional specific provisioning for accounts where resolution plans are implemented;
  • Clarify and differentiate income recognition norms through Paragraph 116A and 116B, distinguishing between normal and repeatedly restructured accounts.

These changes require AIFIs to closely align their internal credit risk, accounting and provisioning policies with the updated regulatory framework.

Key Amendment: Treatment of Accounts under Resolution Plans

Standard Classification for Calamity-Affected Borrowers – Paragraph 47A

Under the new Paragraph 47A, where a resolution plan is implemented in accordance with Chapter VI-A of the Reserve Bank of India (All India Financial Institutions – Resolution of Stressed Assets) Directions, 2025 (dated November 28, 2025), AIFIs are allowed specific relaxations in asset classification for calamity-impacted accounts.

Broadly, the amended clause provides that:

  • Borrower accounts that were already classified as ‘Standard’ at the time of implementing the resolution plan can continue to be treated as ‘Standard’ after implementation, provided the resolution is in full compliance with Chapter VI-A.
  • Where borrower accounts, affected by a calamity, slipped into NPA between:
    • the date on which the calamity occurred, and
    • the date on which the resolution plan is implemented,
      such accounts shall be upgraded back to ‘Standard’ upon implementation of the resolution plan.

Important: Once the resolution plan is implemented and the account has been classified or upgraded as ‘Standard’, all subsequent asset classification will thereafter be governed by the general IRACP norms as laid down in the existing Directions, and not by any special dispensation.

Subsequent Restructuring Without Downgrade – Paragraph 47B

The new Paragraph 47B deals with accounts that have already undergone restructuring under Paragraphs 119I to 119Q of the Reserve Bank of India (All India Financial Institutions – Resolution of Stressed Assets) Directions, 2025.

Where such accounts require further restructuring under Chapter VI-A of the same Directions, the amendment provides that:

  • These accounts shall continue to be classified as ‘Standard’, even after such subsequent restructuring, subject to adherence to the prescribed framework.

This ensures that, for calamity-related or other specified restructuring under the stressed assets framework, multiple restructuring events do not automatically trigger a downgrade in classification, provided all conditions are met.

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