New Delhi [India], July 16 (ANI): The Reserve Bank of India (RBI) has issued final directions for commercial banks, small finance banks (SFBs) and non-banking financial companies (NBFCs), directing them not to recognise unrealised interest and charges as income when they acquire specified non-financial assets (SNFAs) in resolution of stressed loans.

The directions follow the finalisation of the Prudential Norms on Specified Non-Financial Assets (SNFA), after examining stakeholder feedback received on the draft directions issued on May 5, 2026. The amended directions will come into force from October 1.

'Any accrued but unrealised interest and / or charges from the extinguished exposure pertaining to periods prior to acquisition of an SNFA, shall not be recognised as income upon acquisition of the SNFA,' the RBI said.

Under the new income recognition norms, the RBI said any accrued but unrealised interest and charges relating to the extinguished loan exposure before acquisition of an SNFA shall not be recognised as income upon acquisition of the asset.

The central bank further directed that if such unrealised income has already been recognised in respect of any SNFA outstanding in the books of commercial banks, small finance banks or NBFCs as on September 30, 2026, it must be reversed through the Profit and Loss account by September 30, 2027, to the extent it remains unrealised on that date.

The RBI also clarified the accounting treatment for income and expenses arising from these assets. It said any income received from an SNFA should be recognised in the income statement as 'non-interest/other income' in the financial year in which it is actually realised.

Similarly, any expenditure incurred towards the upkeep of an SNFA should be recognised in the income statement in the financial year in which the expense is incurred.

The directions have been issued through amendments to the Income Recognition, Asset Classification and Provisioning (IRACP) framework for commercial banks, small finance banks and NBFCs, following the issuance of the amended Resolution of Stressed Assets Directions, 2026.

The RBI said these changes are aimed at ensuring uniform prudential treatment and accounting practices for specified non-financial assets acquired during the resolution of stressed loans across regulated entities.

The amended framework applies to commercial banks, small finance banks and non-banking financial companies that acquire immovable assets in satisfaction of their claims on defaulting borrowers as part of the resolution process.

According to the RBI, the revised directions will strengthen prudential norms by ensuring that only realised income from such acquired assets is recognised in financial statements, while unrealised interest or charges relating to the original stressed exposure are not treated as income. The amended directions will be effective from October 1, 2026. (ANI)