RBI Issues Prudential Norms for Specified Non-Financial Assets Held by Regulated Entities
The Reserve Bank of India has issued final prudential norms for Specified Non-financial Assets (SNFAs), the immovable property that banks, NBFCs and other regulated entities take over from defaulting borrowers in satisfaction of their dues. The rules were announced through RBI Press Release No. 2026-2027/687 dated 16 July 2026 and take effect from 1 October 2026. They were issued as 16 amendment directions covering commercial banks, small finance banks, NBFCs, all-India financial institutions, urban and rural co-operative banks, regional rural banks and local area banks.
The RBI had released draft "Prudential Norms on Specified Non-financial Assets (SNFA) Directions" on 5 May 2026 for public comment. After reviewing the feedback, it finalised the framework and published a statement of the comments received and its responses along with the press release.
How the rules were issued
Instead of a standalone master direction, the RBI inserted the SNFA provisions into two existing sets of directions for each class of regulated entity:
- Resolution of Stressed Assets amendment directions, which define an SNFA and set the conditions for acquisition, valuation, holding, disposal and reporting. For commercial banks this is the Commercial Banks – Resolution of Stressed Assets Third Amendment Directions, 2026 (RBI/2026-27/187, DOR.STR.REC.168/21-04-048/2026-27).
- Income Recognition, Asset Classification and Provisioning amendment directions, which deal with interest and income on SNFAs. For commercial banks this is RBI/2026-27/195 (DOR.STR.REC.160/21-04-048/2026-27).
Matching amendments were issued for small finance banks, NBFCs (including housing finance companies), AIFIs, UCBs, rural co-operative banks, RRBs and local area banks, all dated 16 July 2026.
What counts as an SNFA
For commercial banks, an SNFA is an immovable asset acquired by the bank in satisfaction or part satisfaction of its claims on the borrower, including non-banking assets referred to in the Banking Regulation Act, 1949. The key conditions are:
- The borrower's exposure must already be classified as non-performing. The RBI rejected requests to allow acquisition at the SMA stage, calling SNFA "strictly a measure of last resort, not a primary recovery tool".
- The asset is taken over on full or partial extinguishment of the exposure on a non-recourse basis, and clear title must pass to the lender. Symbolic possession under the SARFAESI Act, 2002 is not enough.
- Partial extinguishment of the exposure is treated as a restructuring.
- Only immovable property is covered. Movable assets and properties under legal dispute are outside the framework.
Valuation, holding period and disposal
| Area | Requirement for commercial banks |
|---|---|
| Value on acquisition | Lower of the net book value (NBV) of the extinguished exposure and the distress sale value (DSV) determined by at least two independent external valuers |
| Subsequent carrying value | At each reporting date, the "revised NBV": the extinguished exposure net of the notional provisions that would have applied had the loan stayed on the books |
| Holding period | Dispose of within the period set by board policy, subject to a maximum of seven years |
| Mode of sale | Public auction, following the auction principles of the SARFAESI Act, 2002 |
| Prohibited buyers | The borrower and its related parties, as defined under the Insolvency and Bankruptcy Code, 2016 |
| Own use | An SNFA put to the bank's own use ceases to be an SNFA and is shown under fixed assets |
The main change from the draft is on revaluation. The May draft required the distress sale value to be reassessed every two years after acquisition. According to the RBI's statement on stakeholder comments, this requirement "has been removed" and illustrations on computing NBV have been added instead. The RBI did not accept requests to permit private treaty sales, saying that the absence of competitive bidding "undermines transparency and price discovery", and it retained the ban on sales to related parties.
Income recognition and reporting
Under the income recognition amendment, unrealised interest and charges on the extinguished exposure cannot be booked as income when the SNFA is acquired. Income from an SNFA is recognised as non-interest or other income in the year it is realised, and upkeep expenses are charged in the year they are incurred.
SNFAs are kept out of the computation of gross and net NPAs and other stressed-exposure measures. Banks disclose them as non-banking assets acquired in satisfaction of claims and report details through the RBI's CIMS portal. NBFC-HFCs report to the National Housing Bank.
Existing holdings: one-year glide path
SNFAs outstanding on 30 September 2026 must be brought in line with the new framework by 30 September 2027. Banks must also reverse, through profit and loss by that date, any income earlier recognised on such assets that remains unrealised. The RBI declined requests for a longer or phased transition, stating that "a one-year glide path is considered adequate".
What finance teams and auditors should do now
- Build a complete register of immovable assets taken over from borrowers, including those acquired through recovery or settlement outside routine accounting. Record the date and basis of acquisition, title and possession status, carrying amount, valuation history and disposal plan, and flag assets under litigation.
- Test eligibility: check that each asset was acquired from a non-performing account with clear title. Assets that fail the test do not qualify for SNFA treatment.
- Recompute carrying values using the lower of NBV and DSV at entry and the revised NBV thereafter, and reconcile regulatory values with those in the financial statements.
- Review income already booked on legacy assets and plan the reversal required by 30 September 2027.
- Update board policy on the holding period within the seven-year ceiling, auction procedure, valuer selection and related-party checks.
- Update reporting: CIMS returns, notes to accounts and management information showing ageing, valuation movements, carrying costs and progress on disposal.
Statutory and internal auditors should expect to test the completeness of the SNFA population, title and valuation evidence, board approvals and the quality of disclosures, particularly for assets held for long periods or supported by old valuations.
Updated on 28 September 2026: added the RBI press release, notification numbers, effective date of 1 October 2026, the valuation, holding-period and disposal rules, the legacy transition to 30 September 2027 and the changes from the May 2026 draft; corrected the issue date from 17 July to 16 July 2026.
