The Reserve Bank of India (RBI) announced on Thursday that it is working to harmonize regulations on how banks recognize income and set aside provisions for loans. The central bank is also planning a review of non-fund based contingent facilities provided by lenders.

The RBI noted that interest rate regulations vary across lenders and is conducting a comprehensive review of these instructions to bring uniformity.

To strengthen banking resilience, the regulator is enhancing liquidity stress testing by developing a cash flow analysis framework. This will help assess the impact of extreme but plausible scenarios on banks’ liquidity positions, ensuring they can meet obligations even during crises. The new approach aims to offer a forward-looking perspective on banks’ liquidity stability under adverse conditions.

Highlighting the growing focus on climate risks, the RBI said it will issue prudential guidelines for banks, covering climate-related financial risk disclosures, climate scenario analysis, and stress testing. The guidelines will also include principles for effective management and supervision of climate risks, a review of green deposit frameworks, and rules for sustainability-linked loans.

The RBI will soon launch the Reserve Bank Climate Risk Information System (RB-CRIS), a dedicated data repository for climate risk information.

Additionally, draft guidelines on the Expected Credit Loss (ECL) framework are expected shortly. The regulator also plans to strengthen supervisory frameworks for payment banks and small finance banks and move forward with implementing the final phase of Basel III norms.