The Standard Stance - RBI’s Draft Directions on Asset Classification, Provisioning and Income Recognition: What Changed and Why it Matters
The Accounting Advisory Services (AAS) team at BDO India is pleased to share 'THE STANDARD STANCE' - An expert insight into key accounting matters. Each monthly issue of the publication spotlights and discusses a key accounting matter noteworthy for organisations to stay ahead in their business journeys.
This issue of THE STANDARD STANCE - RBI’s Draft Directions on Asset Classification, Provisioning and Income Recognition: What Changed and Why it Matters covers RBI’s proposed shift to the ECL framework and its potential impacts
In October 2025, the Reserve Bank of India issued draft Directions proposing one of the most significant prudential reforms for Indian banks — a shift from the existing incurred-loss model to a forward-looking Expected Credit Loss (ECL) framework. The draft also updates income-recognition principles and introduces staging criteria aligned with global practices.
This edition of The Standard Stance summarises the key provisions of the draft Directions, explains the RBI’s rationale for modernising the prudential framework, and highlights potential impacts on banks, borrowers and the supervisory ecosystem. It also outlines the transition timeline, operational challenges, and model and data requirements.
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