The draft “Prudential Norms on Specified Non-financial Assets (SNFA) Directions” clarifies that regulated entities (REs) are generally not expected to hold non-financial assets as part of routine lending operations. However, in exceptional cases—such as when loans turn non-performing and recovery options are exhausted—lenders may take possession of immovable assets pledged as collateral.
The central bank said such acquisitions should form part of a structured recovery strategy, with a focus on timely and transparent disposal to maximise recoveries.
Under the proposed framework, only exposures classified as non-performing and deemed unviable through other recovery channels will qualify for extinguishment through acquisition of assets. Lenders may acquire these assets either fully or partially against outstanding dues. In cases of partial settlement, the remaining exposure will be treated as restructured and subject to existing prudential norms.
The RBI has proposed that such assets be recorded at the lower of the net book value of the extinguished exposure or their distress sale value. At subsequent reporting periods, they must be valued at the lower of the latest distress sale value or the revised net book value after accounting for notional provisions.
To ensure timely resolution, the draft sets a maximum holding period of seven years for such assets. It also bars lenders from selling these assets back to the original borrower or related parties, a move aimed at reducing moral hazard.
Additionally, lenders will be required to disclose the stock of such specified non-financial assets in their balance sheets, enhancing transparency for stakeholders.
The RBI has invited public and stakeholder comments on the draft guidelines until May 26.
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First Published: May 6, 2026 9:56 AM IST
