DRAFT FOR COMMENTS

RBI/2025-26/--
DOR.ACC.REC.No.0-00-000/2025-26

XX, 2025

Reserve Bank of India (Rural Co-operative Banks – Financial Statements: Presentation and Disclosures) Directions, 2025

In exercise of the powers conferred by section 35A read with Section 56 of the Banking Regulation Act, 1949 the Reserve Bank of India being satisfied that it is necessary and expedient in the public interest and in the interest of banking policy to do so, hereby, issues the Directions hereinafter specified.

Chapter I - Preliminary

A Short title and commencement

1. These Directions shall be called the Reserve Bank of India (Rural Co-operative Banks - Financial Statements: Presentation and Disclosures) Directions, 2025.

2. These Directions shall come into effect on the day these are placed on the official website of the Reserve Bank of India.

B Applicability

3. These Directions shall be applicable to Rural Co-operative Banks (hereinafter collectively referred to as 'banks' and individually as a 'bank').

In this context, ‘Rural Co-operative Banks (RCBs)’ shall mean State Co-operative Banks and Central Co-operative Banks, as defined in the National Bank for Agriculture and Rural Development Act, 1981.

Chapter II - Balance sheet and Profit and Loss account

A Format of the balance sheet and profit and loss account

4. In terms of the provisions of section 29 read with section 56 of the Banking Regulation Act, 1949, an RCB shall in respect of all business transacted by it prepare a Balance Sheet and Profit and Loss Account as on the last working day of the year or the period, as the case may be, in the Forms set out in the Third Schedule of the Banking Regulation Act, 1949 as substituted by clause (zl) of section 56 of the said Act.

B Notes and instructions for compilation

5. A bank shall be guided by the announcements of the Institute of Chartered Accountants of India (ICAI) regarding applicability of Accounting Standards, subject to Directions/ Guidelines issued by the Reserve Bank of India. As per prevailing pronouncements of the ICAI, co-operative banks are classified as Level I enterprises. Level I enterprises are required to comply with all the accounting standards.

Note - Mere mention of an activity, transaction or item in the Directions does not imply that it is permitted, and the bank shall refer to the extant statutory and regulatory requirements while determining the permissibility or otherwise of an activity or transaction.

C Guidance on specific issues with respect to certain Accounting Standards

6. A bank shall also be guided by following with respect to relevant issues in the application of certain Accounting Standards for the bank.

(1) Accounting Standard 5 - Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies

(i) The objective of this standard is to prescribe the classification and disclosure of certain items in the statement of profit and loss so that all enterprises prepare and present such a statement on a uniform basis.

(ii) Accordingly, this Standard requires the classification and disclosure of extraordinary and prior period items, and the disclosure of certain items within profit or loss from ordinary activities. It also specifies the accounting treatment for changes in accounting estimates and the disclosures to be made in the financial statements regarding changes in accounting policies.

(iii) Paragraph 4.3 of Preface to the Statements on Accounting Standards issued by the ICAI states that Accounting Standards are intended to apply only to items which are material. Since materiality is not objectively defined, it has been decided that a bank shall ensure compliance with the provisions of the Accounting Standard in respect of any item of prior period income or prior period expenditure which exceeds one percent of the total income / total expenditure of the bank if the income / expenditure is reckoned on a gross basis or one percent of the net profit before taxes or net losses as the case may be if the income is reckoned net of costs. 

(iv) Since the format of the profit and loss accounts of a bank prescribed in Form B under Third Schedule to the Banking Regulation Act, 1949 does not specifically provide for disclosure of the impact of prior period items on the current year’s profit and loss, such disclosures, wherever warranted, may be made in the ‘Notes on Accounts’ to the balance sheet of a bank.

(2) Accounting Standard 9 – Revenue Recognition

(i) Non-recognition of income by the bank in case of non-performing advances and non-performing investments, in compliance with the regulatory prescriptions of the Reserve Bank of India, shall not attract a qualification by the statutory auditors as this would be in conformity with provisions of the standard, as it recognises postponement of recognition of revenue where collectability of the revenue is significantly uncertain.

 (3) Accounting Standard 11 - The Effects of Changes in Foreign Exchange Rates

(i) AS 11 is applied in the context of the accounting for transactions in foreign currencies Exchange rate for recording foreign currency transactions As per paragraphs 9 and 21 of the Standard, a foreign currency transaction shall be recorded, on initial recognition in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. A bank may face difficulty in applying the exchange rate prevailing at the date of the transaction in respect of the items which are not being recorded in Indian Rupees or are currently being recorded using a notional exchange rate, A bank, which is in a position to apply the exchange rate prevailing on the date of the transaction for recording the foreign currency transactions as required under AS 11 shall comply with the requirements. A bank, which has an extensive branch network, have a high volume of foreign currency transactions and is not fully equipped on the technology front shall be guided by the following:

(a) Paragraph 10 of the Standard allows, for practical reasons, the use of a rate that approximates the actual rate at the date of the transaction The Standard also states that if exchange rates fluctuate significantly, the use of average rate for a period is unreliable. Since the enterprises are required to record the transactions at the date of the occurrence thereof, the weekly average closing rate of the preceding week can be used for recording the transactions occurring in the relevant week, if the same approximates the actual rate at the date of the transaction. In view of the practical difficulties which a bank may have in applying the exchange rates at the dates of the transactions and since the Standard allows the use of a rate that approximates the actual rate at the date of the transaction, the bank may use average rates as detailed below:

(b) FEDAI publishes a weekly average closing rate at the end of each week and a quarterly average closing rate at the end of each quarter for various currencies.

(c) In respect of Indian branches, those foreign currency transactions, which are currently not being recorded in Indian Rupees at the date of the transaction or are being recorded using a notional exchange rate shall now be recorded at the date of the transaction by using the weekly average closing rate of the preceding week, published by FEDAI, if the same approximates the actual rate at the date of the transaction.

(d) If the weekly average closing rate of the preceding week does not approximate the actual rate at the date of the transaction, the closing rate at the date of the transaction shall be used. For this purpose, the weekly average closing rate of the preceding week would not be considered approximating the actual rate at the date of the transaction if the difference between (A) the weekly average closing rate of the preceding week and (B) the exchange rate prevailing at the date of the transaction, is more than three and a half percent of (B).

(e) A bank is encouraged to equip itself to record the foreign currency transactions of Indian branches as well as integral foreign operations and translate the income as well as expense items of non-integral foreign operations at the exchange rate prevailing on the date of the transaction.

(ii) Closing rate

(a) Paragraph 7 of the Standard defines ‘Closing rate’ as the exchange rate at the balance sheet date. To ensure uniformity among banks, closing rate to be applied for the purposes of AS 11 (revised 2003) for the relevant accounting period shall be the last closing spot rate of exchange announced by FEDAI for that accounting period.

(4) Accounting Standard 17 – Segment Reporting

The indicative formats for disclosure under ‘AS 17 – Segment Reporting’ are as below.

Format

Part A: Business segments

(Amount in ₹ crore)

Note: No disclosure need be made in the shaded portion
Note:

a) The business segments will be ‘Treasury’, ‘Corporate / Wholesale Banking’, ‘Retail Banking’ and ‘Other banking operations’.

b) A bank shall adopt its own methods, on a reasonable and consistent basis, for allocation of expenditure among the segments.

c) ‘Treasury’ shall include the entire investment portfolio.

d) Retail Banking shall include exposures which fulfil the four criteria of orientation, product, granularity, and low value of individual exposures for retail exposures laid down in Reserve Bank of India (Rural Co-operative Banks – Prudential Norms on Capital Adequacy) Directions, 2025. Individual housing loans will also form part of Retail Banking segment for the purpose of reporting under AS-17.

e) Corporate / Wholesale Banking includes all advances to trusts, partnership firms, companies, and statutory bodies, which are not included under ‘Retail Banking’.

f) Other Banking Business includes all other banking operations not covered under ‘Treasury, 'Wholesale Banking' and 'Retail Banking' segments. It shall also include all other residual operations such as para banking transactions / activities.

g) Besides the above-mentioned segments, a bank shall report additional segments within ‘Other Banking Business’ which meet the quantitative criterion prescribed in the AS 17 for identifying reportable segments.

(5) Accounting Standard 18 – Related Party Disclosures

The manner of disclosures required by paragraphs 23 to 26 of AS 18 is illustrated as below. It may be noted that the format given below is merely illustrative in nature and is not exhaustive.
(Amount in ₹ crore)

#The outstanding at the year end and the maximum during the year are to be disclosed
*Contract services etc. and not services like remittance facilities, locker facilities etc.
Note:

i) Related parties for a bank are its parent, subsidiary(ies), associates / joint ventures, Key Management Personnel (KMP) and relatives of KMP. KMP are the whole-time directors for an Indian bank. Relatives of KMP would be on the lines indicated in section 45 S of the RBI Act, 1934

ii) The name and nature of related party relationship shall be disclosed, irrespective of whether there have been transactions, where control exists within the meaning of the Standard. Control would normally exist in case of parent-subsidiary relationship. The disclosures may be limited to aggregate for each of the above related party categories and would pertain to the year-end position as also the maximum position during the year.

iii) Secrecy provisions: If in any of the above category of related parties there is only one related party entity, any disclosure would tantamount to infringement of customer confidentiality. In terms of AS 18, the disclosure requirements do not apply in circumstances when providing such disclosures would conflict with the reporting enterprise’s duties of confidentiality as specifically required in terms of statute, by regulator or similar competent authority. Further, in case a statute or regulator governing an enterprise prohibits the enterprise from disclosing certain information, which is required to be disclosed, non-disclosure of such information would not be deemed as non-compliance with the Accounting Standards. On account of the judicially recognised common law duty of a bank to maintain the confidentiality of the customer details, it need not make such disclosures. In view of the above, where the disclosures under the Accounting Standards are not aggregated disclosures in respect of any category of related party i.e., where there is only one entity in any category of related party, a bank need not disclose any details pertaining to that related party other than the relationship with that related party.

(6) Accounting Standard 24 - Discontinuing operations

(i) This Standard establishes principles for reporting information about discontinuing operations.  Merger / closure of branches of a bank by transferring the assets / liabilities to the other branches of the same bank may not be deemed as a discontinuing operation and hence this Accounting Standard will not be applicable to merger / closure of branches of a bank by transferring the assets / liabilities to the other branches of the same bank.

(ii) Disclosures shall be required under the Standard only when:

(a) discontinuing of the operation has resulted in shedding of liability and realisation of the assets by the bank or decision to discontinue an operation which will have the above effect has been finalised by the bank and
(b) the discontinued operation is substantial in its entirety.

(7) Accounting Standard 25 – Interim Financial Reporting

(i) This Standard prescribes the minimum content of an interim financial report and the principles for recognition and measurement in a complete or condensed financial statements for an interim period.

(ii) The disclosures required to be made by a listed bank in terms of the listing agreements would not tantamount to interim reporting as envisaged under AS 25 and as such AS 25 is not mandatory for the quarterly reporting prescribed for listed a bank.

(iii) The recognition and measurement principles laid down under AS 25 shall however, be complied with in respect of such quarterly reports.

(8) Accounting Standard 26 – Intangible asset

(i) This Standard prescribes the accounting treatment for intangible assets that are not dealt with specifically in another accounting standard. With respect to computer software which has been customised for the bank’s use and is expected to be in use for some time, the detailed recognition and amortisation principle in respect of computer software prescribed in the Standard adequately addresses these issues and may be followed by the bank.

(ii) It may be noted that intangible assets recognised and carried in the balance sheet of a bank in compliance with AS 26 shall attract provisions of section 15(1) of the Banking Regulation Act 1949, in terms of which a bank is prohibited from declaring any dividend until any expenditure not represented by tangible assets is carried in the balance sheet.

(iii) A bank desirous of paying dividend while carrying any intangible assets in its books must seek exemption from section 15(1) of the Banking Regulation Act, 1949 from the Central Government.

(9) Accounting Standard 28 – Impairment of assets

(i) This standard prescribes the procedures that an enterprise applies to ensure that its assets are carried at no more than their recoverable amount. It is clarified that the standard shall not apply to inventories, investments and other financial assets such as loans and advances and shall generally be applicable to a bank in so far as it relates to fixed assets.

(ii) The Standard shall generally apply to financial lease assets and non-banking assets acquired in settlement of claims only when the indications of impairment of the entity are evident.

Chapter III - Disclosure in Financial Statements – Notes to Accounts

7. A bank shall disclose information as specified in this chapter in the notes to accounts of the financial statements.

Explanation 1: These disclosures are intended only to supplement and not to replace disclosure requirements under other laws, regulations, or accounting and financial reporting standards.
Explanation 2: A bank is encouraged to make disclosures that are more comprehensive than the minimum required under these Directions, especially if such disclosures significantly aid in the understanding of the financial position and performance.

A General

8. The items listed in these Directions shall be disclosed in the ‘Notes to Accounts’ to the financial statements. A bank shall make additional disclosures where material.

B Presentation

9. In addition to the schedules to the balance sheet, a summary of ‘significant accounting policies’ and ‘notes to accounts’ shall be disclosed as separate Schedules.

C Disclosure requirements

10. A bank shall, at the minimum, furnish the following information in the ‘notes to accounts’. The bank shall note that mere mention of an activity, transaction or item in the disclosure template does not imply that it is permitted, and the bank shall refer to the extant statutory and regulatory requirements while determining the permissibility or otherwise of an activity or transaction. The bank shall disclose comparative information in respect of the previous period for all amounts reported in the current period’s financial statements. Further, the bank shall include comparative information for narrative and descriptive information if it is relevant to understanding the current period’s financial statements.

(1) Regulatory capital

(i) Composition of regulatory capital

(Amount in ₹ crore)

* Example: A bank may disclose as under

**Example: A bank may disclose as under:

(ii) Draw down from Reserves

(a) Suitable disclosures mentioning the amount and the rationale for withdrawal shall be made regarding any draw down from reserves.

(2) Asset liability management

(i) Maturity pattern of certain items of assets and liabilities

(Amount in ₹ crore)

(3) Investments

(i) Composition of Investment Portfolio

(ii) Movement of provisions for depreciation on investments, non-performing investments (NPIs) and investment fluctuation reserve (IFR)

(Amount in ₹ crore)

(iii) Sale and transfers to / from Permanent category

(iv) In case of transfers of securities to/from permanent category, an RCB shall make disclosure in the ‘Notes to Accounts’ to the Financial Statements. Non-SLR investment portfolio

(a) Non-performing non-SLR investments

                                                            (Amount in ₹ crore)

(b) Issuer composition of non-SLR investments

(Amount in ₹ crore)

Note: 

1. For a bank the total shall match the total of non-SLR investments held by the bank.

2. Amounts reported under columns 4, 5, 6 and 7 above may not be mutually exclusive.

(v) Repo transactions (in face value and market value terms)

 (Amount in ₹ crore)

Note -

(i) ‘FV’ means Face Value and ‘MV’ means Market Value.

(ii) The disclosure shall be as specified in Repurchase Transactions (Repo) (Reserve Bank) Directions, 2018 as amended from time to time.  For ease of reference the disclosure template as on the date of issuance of this Master Direction has been reproduced here.

(vi) Government Security Lending (GSL) transactions (in market value terms)

As at … (current year balance sheet date)
(Amount in ₹ crore)

As at … (previous year balance sheet date)
(Amount in ₹ crore)

Note - The disclosure shall be as specified in Reserve Bank of India (Government Securities Lending) Directions, 2023, as amended from time to time. For ease of reference the disclosure template as on the date of issuance of this Direction has been reproduced here.

(4) Asset quality

(i) Classification of advances and provisions held

(ii) Sector-wise advances and Gross NPAs

(iii) Overseas assets, NPAs and revenue

                                                                   (Amount in ₹ crore)

Note - If a bank does not have any overseas assets, NPAs and revenues, in both the current and previous year it may omit this disclosure.

(iv) Details of accounts subjected to restructuring (as defined as per applicable regulations)

Note: A bank shall disclose in its published Annual Balance Sheets the amount and number of accounts in respect of which applications for restructuring are under process, but the restructuring packages have not yet been approved.

(v) Disclosure of transfer of loan exposure

A lender shall make appropriate disclosures in its financial statements, under ‘Notes to Accounts’, relating to the total amount of loans not in default / stressed loans transferred and acquired to / from other entities as prescribed below, on a quarterly basis:

(a) In respect of loans not in default that are transferred or acquired, the disclosures shall cover, inter alia, aspects such as weighted average maturity, weighted average holding period, retention of beneficial economic interest, coverage of tangible security coverage, and rating-wise distribution of rated loans. Specifically, a transferor shall disclose all instances where it has agreed to replace loans transferred to transferee(s) or pay damages arising out of any representation or warranty. The disclosures shall also provide break-up of loans transferred / acquired through assignment / novation and loan participation.

(b) In the case of stressed loans transferred or acquired, the following disclosures shall be made:

(c) The transferor(s) shall also make appropriate disclosures with regard to the quantum of excess provisions reversed to the profit and loss account on account of sale of stressed loans. Also, the lender shall disclose the distribution of the SRs held by them across the various categories of Recovery Ratings assigned to such SRs by the credit rating agencies.

(vi) Fraud accounts

A bank shall make disclose details on the number and amount of frauds as well as the provisioning thereon as per template given below.

(vii) Disclosure under resolution framework for COVID-19-related Stress

A special window under the Prudential Framework was extended to enable the lenders to implement a resolution plan in respect of eligible corporate exposures, and personal loans, while classifying such exposures as Standard.  A bank shall make disclosures in the format prescribed below every half-year, i.e., in the financial statements as on September 30 and March 31, starting from the half-year ending September 30, 2021 till all exposures on which resolution plan was implemented are either fully extinguished or completely slip into NPA, whichever is earlier.
Format for disclosures to be made half yearly starting September 30, 2021
(Amounts in ₹ crore)

* As defined in section 3(7) of the Insolvency and Bankruptcy Code, 2016
Note - A bank that is not required by the listing requirements or otherwise to publish quarterly / half-yearly statements, shall make the disclosures for the full year in the annual financial statements.

(5) Exposures

(i) Exposure to real estate sector

     (Amount in ₹ crore)

(ii) Exposure to capital market

     (Amount in ₹ crore)

Note: A bank may omit those line items which are not applicable/ permitted or have nil exposure both in current and previous year.

(iii) Risk category-wise country exposure

     (Amount in ₹ crore)

*Till a bank moves over to internal rating systems, it shall use the seven-category classification followed by Export Credit Guarantee Corporation of India Ltd. (ECGC) for the purpose of classification and making provisions for country risk exposures. ECGC shall provide to a bank, on request, quarterly updates of their country classifications and shall also inform banks in case of any sudden major changes in country classification in the interim period.
Note - If a bank has no exposure to country risk in both the current and previous year, it may omit disclosure of the table while mentioning that it has no exposure to country risk.

(iv) Unsecured advances

A bank shall disclose the total amount of advances for which intangible securities such as charge over the rights, licenses, authority, etc. have been taken as also the estimated value of such intangible collateral as per the following format.
(Amounts in ₹ crore)

(v) Factoring exposures

Exposure of Rural Co-operative Banks

A bank shall disclose details of its exposure as per the template specified below:

(a) State Co-operative Banks

(b) Central Co-operative Banks

(vii) Loans against gold and silver collateral

(a) Details of loans extended against eligible gold and silver collateral

Note: 

(i) The disclosure shall be as specified in Reserve Bank of India (Rural Co-operative Banks – Credit Facilities) Directions, 2025, as amended from time to time.  For ease of reference the disclosure template has been reproduced here.
(ii) Information may be disclosed separately for loans against gold collateral and loans against silver collateral
(iii) Average LTV ratio is Calculated as ratio of sum of LTVs of loans at the time of sanction to total number of such loans.

(b) Details of gold and silver collateral and auctions

Note
(i) Weight and value of collateral to be calculated in accordance with Reserve Bank of India (Rural Co-operative Banks – Credit Facilities) Directions, 2025 (as amended from time to time).
(ii) Unclaimed gold or silver collateral as defined under Reserve Bank of India (Rural Co-operative Banks – Credit Facilities) Directions, 2025 (as amended from time to time).

(6) Concentration of deposits, advances, exposures and NPAs

(i) Concentration of deposits

     (Amount in ₹ crore)

(ii) Concentration of advances*

     (Amount in ₹ crore)

*Advances shall be computed based on credit exposure i.e., funded and non-funded limits including derivative exposures where applicable. The sanctioned limits or outstanding, whichever are higher, shall be reckoned. However, in the case of fully drawn term loans, where there is no scope for redrawal of any portion of the sanctioned limit, a bank may reckon the outstanding as the credit exposure

(iii) Concentration of exposures**

     (Amount in ₹ crore)

**Exposures shall be computed as per applicable RBI regulation.

(iv) Concentration of NPAs                                                       

        (Amount in ₹ crore)

(7) Derivatives

Note – A bank that has not entered into any derivative transactions, both in the current and previous year may omit these disclosures and instead disclose that it has not entered into any transactions in derivatives in the current and previous years.

(i) Forward rate agreement / Interest rate swap

(Amount in ₹ crore)

Note:  Nature and terms of the swaps including information on credit and market risk and the accounting policies adopted for recording the swaps shall also be disclosed.

(ii) Exchange traded interest rate derivatives

(Amount in ₹ crore)

(iii) Disclosures on risk exposure in derivatives

(a) Qualitative disclosures

A bank shall disclose its risk management policies pertaining to derivatives with particular reference to the extent to which derivatives are used, the associated risks and business purposes served. The disclosure shall also include:

(i) the structure and organisation for management of risk in derivatives trading,

(ii) the scope and nature of risk measurement, risk reporting and risk monitoring systems,

(iii) policies for hedging and / or mitigating risk and strategies and processes for monitoring the continuing effectiveness of hedges / mitigants, and

(iv) accounting policy for recording hedge and non-hedge transactions; recognition of income, premiums and discounts; valuation of outstanding contracts; provisioning, collateral and credit risk mitigation.

(b) Quantitative disclosures

(Amount in ₹ crore)

Note: The net position shall be shown either under asset or liability, as the case may be, for each type of derivatives.

(8) Transfers to Depositor Education and Awareness Fund (DEA Fund)

      (Amount in ₹ crore)

(9) Disclosure of complaints

(i) Summary information on complaints received by a bank from customers and from the Offices of Ombudsman (previously office of banking ombudsman)

(ii) Top five grounds of complaints received by the bank from customers

Note - As per Master List for identifying grounds of complaints as provided in Appendix 1 to circular CEPD.CO.PRD.Cir.No.01/13.01.013/2020-21 dated January 27, 2021 on ‘Strengthening the Grievance Redress Mechanism of Banks’.

(10) Disclosure of penalties imposed by the Reserve Bank of India

(i) Penalties imposed by the Reserve Bank of India under the provisions of the (i) Banking Regulation Act, 1949, (ii) Payment and Settlement Systems Act, 2007 and (iii) Government Securities Act, 2006 (for bouncing of SGL) shall be disclosed in the ‘Notes to Accounts’ to the balance sheet in the concerned bank’s next Annual Report. 

(ii) A bank shall make appropriate disclosures on the nature of the breach, number of instances of default and the quantum of penalty imposed.

(iii) The defaulting participant in a reverse repo transaction shall make appropriate disclosure on the number of instances of default as well as the quantum of penalty paid to the Reserve Bank of India during the financial year.

(11) Other Disclosures

(i) Business ratios

1Working funds to be reckoned as average of total assets (excluding accumulated losses, if any) as reported to Reserve Bank of India in Form IX for Co-operative Banks, during the 12 months of the financial year.

2Net Interest Margin = Net Interest Income / Average Earning Assets Where Net Interest Income= Interest Income – Interest Expense.
3Return on Assets shall be with reference to average working funds (i.e., total of assets excluding accumulated losses, if any).
4For the purpose of computation of business per employee (deposits plus advances), inter-bank deposits shall be excluded.

(ii) Bancassurance business

The details of fees / brokerage earned in respect of insurance broking, agency and bancassurance business undertaken by a bank shall be disclosed for both the current year and previous year.

(iii) Marketing and distribution

A bank shall disclose the details of fees / remuneration received in respect of the marketing and distribution function (excluding bancassurance business) undertaken by it.

(iv) Provisions and contingencies

                                                                                                (Amount in ₹ crore)

(v) Payment of DICGC Insurance Premium

(Amount in ₹ crore)

(vi) Disclosure of facilities granted to directors and their relatives

A bank shall disclose any fund or non-fund (guarantees, letters of credit, etc.) facilities extended to directors, their relatives, companies or firms in which they are interested.

Chapter IV - Other Instructions

A Inter-branch account - provisioning for net debit balance

11. A bank shall adhere to following guidelines for unreconciled inter-branch account entries.

(1) The bank shall segregate the credit entries outstanding for more than five years in the inter-branch account and transfer them to a separate ‘Blocked Account’ which shall be shown under ‘Other Liabilities - Suspense’.

(2) Any adjustment from the Blocked Account shall be permitted only with the authorisation of two officials, one of whom should be from the Controlling / Head Office if the amount exceeds Rupees One lakh.

(3) The balance in Blocked Account shall be reckoned as a liability for the purpose of the maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).

(4) The bank shall maintain category-wise (head-wise) accounts for various types of transactions put through inter-branch accounts, so that the netting can be done category-wise. As on the balance sheet date, the bank shall segregate the debit and credit entries remaining unreconciled for more than six months and arrive at the net position category-wise, while also considering the balance in the Blocked Account.

(5) The net debit under all the categories of inter-branch accounts shall be aggregated and a provision equivalent to 100 percent of the aggregate net debit shall be made.

Provided that the bank shall ensure that the net debit in one category is not set-off against net credit in another category.

B Reconciliation of Nostro account and treatment of outstanding entries

12. Treatment of outstanding entries in Nostro accounts shall of a bank shall be as under.

(1) The bank shall take steps to have a strong control over reconciliation and put in place a system of real-time reconciliation, which provides for immediate escalation of differences, if any.

(2) There shall be close monitoring of pending items in Nostro accounts by top management at short intervals.

(3) All unreconciled credit entries in Nostro accounts which are outstanding for more than three years shall be transferred to a Blocked Account and shown as outstanding liabilities.

(4) The balance in the Blocked Account shall be reckoned for the purpose of CRR / SLR.

(5) A bank shall make 100 percent provision in respect of all unreconciled debit entries in the Nostro accounts, which are outstanding for more than two years.

C Transfer to / appropriation from Reserve funds

13. In terms of sections 17(1) and 56 of the Banking Regulation Act, 1949 a bank is required to transfer, out of the balance of profit as disclosed in the profit and loss account, a sum equivalent to not less than 20 percent of such profit to Reserve Fund.

14. Unless specifically allowed by extant regulations, the bank shall take prior approval from the Reserve Bank of India before any appropriation is made from the Statutory Reserve or any other reserve.

15. A bank is further advised that:

(1) all expenses including provisions and write-offs recognised in a period, whether mandatory or prudential, shall be reflected in the profit and loss account for the period as an ‘above the line’ item (i.e., before arriving at the net profit / loss for the year);

(2) draw down from reserves, with the prior approval of Reserve Bank of India, shall be effected only ‘below the line’ (i.e. after arriving at the net profit / loss for the year); and

(3) suitable disclosures shall be made of such draw down in the ‘Notes on Accounts’ to the Balance Sheet.

(4) Subject to compliance with applicable laws, a bank, without prior approval of Reserve Bank of India, can utilise the share premium account for meeting issue expenses of shares to the extent that such expenses are incremental costs directly attributable to the transaction that otherwise would have been avoided.

Provided that the share premium account shall not be utilised for writing off the expenses relating to the issue of debt instruments.
Explanation: For the purposes of this Direction, issue expenses shall include registration and other regulatory fees, payments made to legal, accounting, and other professional advisers, printing costs, and stamp duties.

D Provisioning for fraud

16. In respect of provisioning for frauds, a bank that has reported the fraud within the prescribed time shall have the option to make the provision for the same over a period, not exceeding four quarters, commencing from the quarter in which the fraud has been detected.

17. Where the bank chooses to provide for the fraud over two to four quarters and this results in the full provisioning being made in more than one financial year, subject to compliance with applicable laws, it may debit reserves other than the Statutory Reserve by the amount remaining un-provided at the end of the financial year by credit to provisions.

Provided that it shall subsequently proportionately reverse the debits to the reserves and complete the provisioning by debiting profit and loss account, in the successive quarters of the next financial year.

18. Where there has been delay, beyond the prescribed period, in reporting the fraud to the Reserve Bank, the entire provisioning is required to be made at once.

E Unreconciled balances

19. Unreconciled credit balances in any transitory account representing unclaimed balances shall not be transferred to the profit and loss account or to any reserves.

F Deferred tax liability (DTL) on Special Reserve created under Section 36(1) (viii) of the Income Tax Act, 1961

20. A bank shall make provisions for DTL on the Special Reserve created under section 36(1)(viii) of Income Tax Act, 1961.

G Window dressing

21. A bank shall ensure that balance sheet and profit and loss account reflects true and fair picture of its financial position.

22. Instances of window dressing of financials, short provisioning, misclassification of NPAs, under-reporting / incorrect computation of exposure / risk weight, incorrect capitalisation of expenses, capitalisation of interest on NPAs, deliberate inflation of asset and liabilities at the end of the financial year and subsequent reversal immediately in next financial year, etc. shall be viewed seriously and appropriate penal action in terms of the provisions of the Banking Regulation Act, 1949 shall be considered.

Chapter VI - Repeal and Other Provisions

A Repeal and saving

23. With the issue of these Directions, the existing Directions, instructions, and guidelines relating to Financial Statements- Presentation and Disclosures as applicable to Rural Co-operative Banks stands repealed, as communicated vide notification dated XX, 2025.The Directions, instructions, and guidelines repealed prior to the issuance of these Directions shall continue to remain repealed.

24. Notwithstanding such repeal, any action taken or purported to have been taken, or initiated under the repealed Directions, instructions, or guidelines shall continue to be governed by the provisions thereof. All approvals or acknowledgments granted under these repealed lists shall be deemed as governed by these Directions.

B Application of other laws not barred

25. The provisions of these Directions shall be in addition to, and not in derogation of the provisions of any other laws, rules, regulations or directions, for the time being in force.

C Interpretations