Reserve Bank of India | Photo Credit: cueapi

Banks’ will have to dispose of “specified non-financial assets” (SNFAs), including non-banking assets (NBAs), within a maximum period of seven years acquired from a borrower, whose account has been classified as non-performing (NPA), per RBI’s amendment directions relating to resolution of stressed assets.

The aforementioned timeline has been incorporated in the RBI (Commercial Banks – Resolution of Stressed Assets) Third Amendment Directions, 2026, to ensure timely disposal of such SNFAs.

The central bank noted that a bank generally does not transact in immovable assets as part of its core business operations, except in exceptional cases where it acquires such immovable assets in satisfaction of its claims on the borrower.

So, in order to provide clarity on the prudential treatment of such specified non-financial assets including non-banking assets (NBAs), acquired by a bank through various mechanisms, the RBI has issued prudential norms applicable in such cases. The Directions will come into force with effect from October 1, 2026.

A bank’s policy has to incorporate suitable clauses for acquisition of an SNFA and disposal thereof, per the Directions.

Such provisions need to specify inter-alia the limit on SNFAs as a share of total assets, eligibility criteria, delegation matrix, recovery efforts to be explored before acquisition and maximum period for disposal not exceeding seven years.

In respect of any SNFA outstanding in the books of a bank as on September 30, 2026 (‘Legacy SNFAs’), compliance with these Directions have be achieved latest by September 30, 2027.

An SNFA would be deemed to have been acquired only if the title of the asset is transferred in the name of the bank, and the bank is in a clear position to deal with the asset on its own.

Further, a SNFA can be acquired only in cases where a bank’s exposures to a borrower is classified as non-performing.

A SNFA may be acquired from the borrower against full or partial extinguishment of the bank’s exposure on a non-recourse basis.

Partial extinguishment of exposure shall be treated as restructuring and the residual exposure to the borrower shall attract the prudential treatment applicable to restructuring.

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