Draft Prudential Norms on Specified Non-Financial Assets
Draft Prudential Norms on Specified Non-Financial Assets – Key Highlights
Regulated entities (REs) are generally not expected to hold non-financial assets as part of their routine lending activities. However, in exceptional situations—particularly when a loan turns non-performing and recovery measures such as legal or contractual enforcement have been initiated—REs may acquire ownership of immovable property offered as collateral. Managing and disposing of such assets in a structured, transparent, and timely manner can help maximise recoveries while maintaining prudential discipline.
To bring clarity to the regulatory treatment of these assets (referred to as Specified Non-Financial Assets or SNFAs), the Reserve Bank of India has issued draft prudential guidelines for public consultation.
Key Provisions of the Draft Guidelines:
- Only those exposures classified as non-performing, where all viable recovery avenues have been explored and found ineffective, will qualify under these norms.
- REs are permitted to acquire SNFAs in settlement of their dues, either fully or partially.
- Where the settlement is partial, the remaining exposure will be treated as a restructured asset and governed by applicable prudential norms.
- SNFAs must be initially recorded at the lower of:
- the net book value (NBV) of the extinguished portion of the loan, or
- the estimated distress sale value of the asset.
- On an ongoing basis, these assets should be valued at the lower of:
- the most recent distress sale value, or
- the adjusted NBV (after factoring in notional provisions, as if the loan had remained on the books).
- A maximum holding period of seven years has been prescribed to ensure timely disposal.
- To prevent conflicts of interest or misuse, REs are not allowed to sell these assets back to the borrower or any related party.
- REs must disclose the total value of SNFAs held in their financial statements.
Public Consultation:
Stakeholders and members of the public may submit their comments on the draft guidelines by May 26, 2026. Feedback can be shared through the ‘Connect2Regulate’ section on the RBI website, or sent via post/email to the Chief General Manager, Credit Risk Group, Department of Regulation, Central Office, Mumbai.
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