A ₹300 crore Base Layer NBFC in a Tier 2 city just lost the extra 60 days it used to have to look away from a bad loan. From March 31, 2026, every NBFC in India — regardless of size — must classify a loan as NPA the moment it crosses 90 days overdue.
Four years ago, that same lender had until day 150.
The RBI didn't spring this on anyone. It phased the 90-day NPA norm in deliberately: 150 days overdue by March 2024, 120 days by March 2025, and 90 days by March 2026. Base Layer NBFCs — the non-deposit-taking lenders with total assets under ₹1,000 crore — were the last ones on this path.
Banks and Upper Layer NBFCs have used the 90-day standard for years. As of this year, there's no separate clock for smaller lenders anymore.
The counterintuitive part: this is the change nobody's board deck flagged as urgent, because it's not a new product rule or a lending cap. It's a definitional shift. And definitional shifts are exactly the kind that quietly blow up a provisioning line six months later.
Alongside the glide path, the RBI issued the NBFC Income Recognition, Asset Classification and Provisioning Directions, 2025 — effective November 28, 2025. It's the first time IRACP rules for NBFCs sit in one document instead of scattered across layer-specific master directions and circulars.
Two provisions inside it matter more than the headline 90-day change.
First, borrower-wise NPA classification: if one credit facility to a borrower turns NPA, every other facility that NBFC has extended to the same borrower must be reclassified as NPA too. A working capital loan can no longer stay "standard" while a term loan to the same borrower is in default.
Second, NPA upgradation now requires full clearance of all overdue principal and interest — not just enough of a payment to slip back under 90 days. The RBI closed the exact loophole stressed borrowers and lenders both used to buy time.
Standard assets at Base Layer NBFCs still carry a 0.25% provisioning rate against outstanding loans — 0.40% for Middle and Upper Layer lenders. That part hasn't moved.
What has moved is how fast an account climbs the ladder once it slips. Sub-standard assets attract a 10% general provision, plus another 10% on the unsecured portion. Doubtful assets escalate from 25% (year one) to 40% (years two and three) on the secured portion, with the unsecured portion provisioned at 100% from day one of doubtful classification.
Loss assets: 100%, full stop.
Microfinance-focused NBFCs are already showing the early signal. Sector data through H1 FY26 puts the rise in that segment's NPA ratio at 74 basis points, alongside a contraction in loan book size — the classic pattern of a book shrinking while its bad-loan share grows.
Special Mention Account classification — SMA-0 at 1-30 days overdue, SMA-1 at 31-60, SMA-2 at 61-90 — has to be based on the day-end position, not a month-end snapshot or a review-meeting cutoff. SMA-2 accounts above ₹5 crore must be reported to CRILC automatically.
An NBFC still running SMA classification through a monthly spreadsheet review is not going to catch a borrower who crossed into SMA-2 on day 62 and got pulled back by day 89 through a partial payment. Under the new upgradation rule, that partial payment doesn't even help anymore.
What is the 90-day NPA norm for NBFCs in 2026? It requires every NBFC in India, including Base Layer lenders, to classify a loan account as a Non-Performing Asset once it is more than 90 days overdue, effective March 31, 2026. This aligns NBFC asset classification with the standard banks have followed for years.
Which NBFCs does the 90-day NPA norm apply to? All of them. The phased glide path that gave Base Layer NBFCs (non-deposit-taking, total assets under ₹1,000 crore) extra time — 150 days, then 120 days — ended on March 31, 2026. There is no remaining transition relief.
What is the borrower-wise NPA classification rule? If any single credit facility extended to a borrower turns NPA, every other facility that same NBFC has given that borrower must also be classified as NPA. An NBFC can no longer keep one loan "standard" while a related loan to the same borrower is in default.
Can a partial payment upgrade an NPA account back to standard? No. Under the IRACP Directions 2025, upgradation requires full clearance of all outstanding principal and interest arrears. Bringing the overdue period below 90 days through a partial payment is not sufficient.
Credit teams that are still reconciling NPA classification through spreadsheets are the ones who will find out about a provisioning gap during an RBI inspection, not before one.
Abhishek Gupta is Co-Founder at Dekrypt Labs, building BIOS — a Business Intelligence Operating System for Indian businesses. dekryptlabs.com