{"id":361710,"date":"2026-04-28T17:26:30","date_gmt":"2026-04-28T11:56:30","guid":{"rendered":"https:\/\/forumias.com\/blog\/?p=361710"},"modified":"2026-04-28T17:26:30","modified_gmt":"2026-04-28T11:56:30","slug":"rbis-new-norms-for-recognizing-bad-loans","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/rbis-new-norms-for-recognizing-bad-loans\/","title":{"rendered":"RBI\u2019s New Norms for Recognizing Bad Loans"},"content":{"rendered":"<p><strong>News<\/strong>: The Reserve Bank of India issued 14 final directions on April 27 introducing new norms for recognising bad loans in banks.<\/p>\n<h2>About RBI\u2019s New Norms for Recognizing Bad Loans<\/h2>\n<figure id=\"attachment_361714\" aria-describedby=\"caption-attachment-361714\" style=\"width: 300px\" class=\"wp-caption aligncenter\"><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"size-medium wp-image-361714\" src=\"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/04\/Source-TH-1-1.jpg?resize=300%2C201&#038;ssl=1\" alt=\"RBI\u2019s New Norms for Recognizing Bad Loans\" width=\"300\" height=\"201\" srcset=\"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/04\/Source-TH-1-1.jpg?resize=300%2C201&amp;ssl=1 300w, https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/04\/Source-TH-1-1.jpg?resize=1024%2C685&amp;ssl=1 1024w, https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/04\/Source-TH-1-1.jpg?resize=768%2C514&amp;ssl=1 768w, https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/04\/Source-TH-1-1.jpg?w=1304&amp;ssl=1 1304w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><figcaption id=\"caption-attachment-361714\" class=\"wp-caption-text\">Source &#8211; TH<\/figcaption><\/figure>\n<ul>\n<li><strong>Main change:<\/strong> The new RBI norms <strong>shift banks from the incurred loss model,<\/strong> which is based on <strong>past losses<\/strong>.\n<ul>\n<li>Banks will now follow a forward-looking <strong>Expected Credit Loss (ECL) model<\/strong> that requires them to <strong>build buffers based on likely future losses<\/strong>.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Key Highlights of New RBI Norms:<\/strong>\n<ul>\n<li><strong>Three-Stage Approach:<\/strong> Loss allowance will follow <strong>three stages<\/strong> based on changes in credit risk since initial recognition.\n<ul>\n<li><strong>Stage 1:<\/strong> Financial instruments where there is <strong>no significant increase in credit risk<\/strong>, and <strong>banks will use a 12-month Probability of Default for loss estimation.<\/strong><\/li>\n<li><strong>Stage 2:<\/strong> Financial instruments where there is a <strong>significant increase in credit risk since initial recognition<\/strong>, and <strong>banks will use a lifetime Probability of Default for loss estimation.<\/strong><\/li>\n<li><strong>Stage 3:<\/strong> Under this stage , instruments are seen as \u2018<strong>credit impaired\u2019<\/strong> as at the reporting date, which means the loan is facing serious repayment problems.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Implementation Timeline:<\/strong> The norms will come into effect from <strong>April 1, 2027.<\/strong><\/li>\n<li><strong>Retention of NPA Definition:<\/strong> A loan will still be treated as a <strong>non-performing asset if it remains unpaid for 90 days.<\/strong><\/li>\n<\/ul>\n<\/li>\n<li><strong>Implications for Banks and Economy:<\/strong>\n<ul>\n<li><strong>Improved Risk Management<\/strong>: Banks will use data-driven models and future economic conditions, which will improve transparency and early stress recognition.<\/li>\n<li><strong>Higher Initial Provisioning:<\/strong> Some banks may see a one-time increase in provisioning, but overall capital adequacy impact is expected to remain manageable.<\/li>\n<li><strong>Operational Changes:<\/strong> Banks will require closer integration between finance and risk functions and investment in data systems and modelling capabilities.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>News: The Reserve Bank of India issued 14 final directions on April 27 introducing new norms for recognising bad loans in banks. About RBI\u2019s New Norms for Recognizing Bad Loans Main change: The new RBI norms shift banks from the incurred loss model, which is based on past losses. Banks will now follow a forward-looking&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/rbis-new-norms-for-recognizing-bad-loans\/\">Continue reading <span class=\"screen-reader-text\">RBI\u2019s New Norms for Recognizing Bad Loans<\/span><\/a><\/p>\n","protected":false},"author":10401,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1566,3127,12039],"tags":[11872],"class_list":["post-361710","post","type-post","status-publish","format-standard","hentry","category-daily-factly-articles","category-economy","category-knolls","tag-9pm-daily-factly","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/361710","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10401"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=361710"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/361710\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=361710"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=361710"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=361710"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}