RBI Issues Prudential Framework for Specified Non-Financial Assets (SNFAs)

¨     Reserve Bank of India (RBI) has introduced a prudential framework for Specified Non-Financial Assets (SNFAs) through amendments to the Resolution of Stressed Assets Directions, 2025.

¨     The framework will come into force on 1 October 2026.

¨     It applies to Regional Rural Banks (RRBs), All India Financial Institutions (AIFIs), commercial banks, small finance banks (SFBs), and Non-Banking Financial Companies (NBFCs).

¨     Specified Non-Financial Assets (SNFAs) are immovable assets, including non-banking assets, acquired by lenders in full or partial settlement of claims on borrowers whose loans have become Non-Performing Assets (NPAs).

¨     These assets differ from financial assets because they consist of physical properties or other immovable holdings taken over after loan default.

¨     Regulated entities must formulate internal policies covering the acquisition, eligibility, exposure limits, recovery efforts, and disposal of SNFAs.

¨     The framework prescribes a maximum disposal period of seven years for SNFAs.

¨     It prohibits the sale of SNFAs back to the original borrower or related parties.

¨     Acquired SNFAs must be valued at the lower of the net book value of the extinguished loan or the distress sale value.

¨     The distress sale value must be determined by at least two independent external valuers.

¨     SNFAs will not be classified as Gross NPAs, Net NPAs, or stressed assets.

¨     They will be disclosed separately under specific accounting heads in the balance sheets of banks and other regulated entities.

¨   Legacy SNFAs outstanding as of 30 September 2026 must comply with the new framework by 30 September 2027.

¨     The framework introduces separate valuation, disclosure, and accounting norms for both newly acquired and legacy SNFAs.