The Reserve Bank of India (RBI) has issued the RBI (Small Finance Banks – Income Recognition, Asset Classification and Provisioning) Amendment Directions, 2025, effective January 1, 2026. The amendment follows the earlier Small Finance Banks – Concentration Risk Management Amendment Directions, 2025, and is issued under the powers of Sections 21 and 35A of the Banking Regulation Act, 1949. The primary change involves the deletion of Paragraph 113 under Chapter IV – Provisioning Norms in the original Directions. As a result, small finance banks are now permitted to either reverse previously released provisions or transfer them to the General Reserve. The RBI has emphasized that this change is necessary and expedient in the public interest. This amendment aims to provide greater flexibility to small finance banks in managing their provisioning and reserves, aligning with broader regulatory objectives and risk management practices.
RESERVE BANK OF INDIA
RBI/2025-26/129
DOR.STR.REC.340/21-04-048/2025-26 | Dated: December 4, 2025
Reserve Bank of India (Small Finance Banks – Income Recognition, Asset Classification and Provisioning) Amendment Directions, 2025
Please refer to Reserve Bank of India (Small Finance Banks – Income Recognition, Asset Classification and Provisioning) Directions, 2025 (hereinafter referred to as ‘the Directions’).
2. On a review, consequent to the issuance of Reserve Bank of India (Small Finance Banks – Concentration Risk Management) Amendment Directions, 2025, and in exercise of the powers conferred by the sections 21 and 35A of the Banking Regulation Act, 1949 and all other laws enabling the Reserve Bank in this regard, the Reserve Bank being satisfied that it is necessary and expedient in the public interest so to do, hereby issues the Amendment Directions hereinafter specified.
3. The Amendment Directions modifies the Directions as under:
Paragraph 113 under ‘Chapter IV – Provisioning Norms’ shall stand deleted.
4. Pursuant to the above, a bank shall be free to reverse the released provisions or transfer the same to General Reserve.
5. The above amendment shall come into force from January 1, 2026.
(Vaibhav Chaturvedi)
Chief General Manager
