The Reserve Bank of India has issued Draft Third Amendment Directions, 2026, proposing changes to financial statement presentation and disclosure norms for Local Area Banks. The amendments, issued under Section 35A of the Banking Regulation Act, 1949, align disclosure requirements with updated investment portfolio guidelines. A key revision clarifies the definition of “Revenue Reserve,” specifying that it includes all reserves other than capital reserves but excludes provisions made for depreciation, asset diminution, or known liabilities. Additionally, the draft introduces a structured disclosure format for the movement of provisions relating to non-performing investments (NPIs), requiring banks to report opening balances, additions, write-offs or reversals, and closing balances. These changes aim to enhance transparency, standardization, and clarity in financial reporting by Local Area Banks. The amendments will come into effect upon publication on the RBI website and are part of ongoing regulatory efforts to strengthen disclosure practices and ensure consistency in financial reporting frameworks.
Reserve Bank of India
RBI/2026-27/
DOR.MRG.REC.No. /00-00-001/2026-27
XX, 2026
Reserve Bank of India (Local Area Banks – Financial Statements: Presentation and Disclosures) Third Amendment Directions, 2026 – Draft for Comments
Please refer to Reserve Bank of India (Local Area Banks – Financial Statements: Presentation and Disclosures) Directions, 2025, dated November 28, 2025.
2. On a review, consequent to the issuance of Reserve Bank of India (Local Area Banks – Classification, Valuation, and Operation of Investment Portfolio) Amendment Directions, 2026, and in exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949 (hereinafter called the Act) 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. (i) These Directions shall be called the Reserve Bank of India (Local Area Banks – Financial Statements: Presentation and Disclosures) Third Amendment Directions, 2026.
(ii) These Amendment Directions shall come into effect on the day these are placed on the official website of the Reserve Bank.
4. The Reserve Bank of India (Local Area Banks – Financial Statements: Presentation and Disclosures) Directions, 2025, are amended as provided below.
(i) In the table under paragraph 5(1), notes and instructions for compilation for ‘Revenue and Other Reserves’ under Schedule 2(IV) shall be substituted by the following, namely: –
“The expression ‘Revenue Reserve’ shall mean any reserve other than Capital Reserve. This item will include all reserves, other than those separately classified. The expression ‘reserve’ shall not include any amount retained by way of providing for depreciation, renewals, or diminution in value of assets or retained by way of providing for any known liability.”.
(ii) Paragraph 10(3)(vi) shall be substituted by the following, namely: –
“Movement of provisions for non-performing investments (NPIs)
| (Amount in ₹ crore) | ||
| Particulars | Current Year | Previous Year |
| i) Movement of provisions held towards NPIs
a) Opening balance b) Add: Provisions made during the year c) Less: Write off / write back of excess provisions during the year d) Closing balance |
||
(Sunil T S Nair)
Chief General Manager
