PROVISIONING NORMS – NBFCs
The Reserve Bank of India (RBI), as the primary regulator of non-banking financial companies (NBFCs) in India, establishes comprehensive prudential norms to ensure financial stability and protect the interests of depositors and borrowers. Among these critical regulatory frameworks, asset classification and provisioning norms serve as essential mechanisms for maintaining asset quality, containing credit risk, and promoting transparency in financial reporting.
The provisioning norms delineated herein represent the evolving regulatory stance of the RBI, particularly in light of the uniform application of the 90-day non-performing asset (NPA) classification norm effective March 31, 2026. This framework standardizes the treatment of non-microfinance loans across all NBFC categories, including specialized lending institutions classified as NBFC-BL (NBFC Microfinance).
Asset classification distinguishes between performing and non-performing loans based on arrear periods, while provisioning requirements mandate that financial institutions set aside adequate funds to cover potential losses arising from credit deterioration. The classification spectrum encompasses standard assets, non-performing assets, sub-standard assets, doubtful assets, and loss assets, each carrying distinct provisioning obligations. For doubtful assets—those classified as non-performing for periods exceeding 18 months—the framework introduces a bifurcated provisioning approach differentiating between secured and unsecured portions, with provisions varying between 20% and 100% depending on the duration of classification and nature of collateral.
This comprehensive regulatory guidance ensures that NBFCs maintain prudent provisions against potential credit losses, thereby enhancing systemic stability and reinforcing market confidence in the financial system. The classification and provisioning framework presented in this document reflects current RBI directives and provides a structured methodology for assessing and managing credit risk in non-microfinance loan portfolios.
Asset Classification & Provisioning
Non-Microfinance Loans
Regulatory Note
The 90-day NPA norm is uniformly applicable to all NBFCs (including NBFC-BL) from March 31, 2026.
Asset Classification Overview
| Asset Classification | Arrear Period |
| Standard Assets | Overdue for less than 90 days |
| Non-Performing Assets | Overdue for 90 days or more |
| Sub-Standard Assets | Asset classified as NPA for a period not exceeding 18 months |
| Doubtful Assets | Asset classified as NPA for a period exceeding 18 months |
| Loss Assets | Identified as uncollectible |
Provisioning Requirements by Asset Classification
| Asset Classification | Period/Description | Provisioning % |
| Standard Assets | Overdue < 90 days | 0.25% |
| Non-Performing Assets | Overdue ≥ 90 days | As per sub-category |
| Sub-Standard Assets | NPA for ≤18 months | 10% |
| Doubtful Assets | NPA for >18 months | See secured/unsecured breakdown |
| Loss Assets | Uncollectible | 100% |
Doubtful Assets
Provisioning for doubtful assets is divided into secured and unsecured portions:
(i) Unsecured Portion
Provisioning requirement: 100%
(ii) Secured Portion
Provisioning based on the period the asset has been classified as doubtful:
| Period in Doubtful Category | Provision (%) |
| Up to one year | 20% on secured portion |
| One to three years | 30% on secured portion |
| More than three years | 50% on secured portion |
Loss Assets
Loss assets require 100% provisioning or write-off.
Key Points
Provisioning applies to total exposure, split into secured and unsecured portions for NPAs.
Collateral value (realisable value) determines the secured portion.
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