The Reserve Bank of India has introduced a prudential framework for Specified Non-Financial Assets (SNFAs) through amendments to the Resolution of Stressed Assets Directions, 2025. The framework applies to Regional Rural Banks, All India Financial Institutions, commercial banks, small finance banks, and non-banking financial companies, and it comes into force on 1 October 2026.
Specified Non-Financial Assets
SNFAs are immovable assets, including non-banking assets, acquired by banks in full or partial satisfaction of claims on a borrower whose loan has been classified as a non-performing asset. In banking practice, such assets are distinct from financial claims because they are physical properties or other immovable holdings taken over after loan default.
Policy and Disposal Rules
Banks are required to frame internal policies for the acquisition, limits, eligibility, recovery efforts, and disposal of SNFAs. The framework prescribes a maximum disposal period of seven years for such assets. It also prohibits the sale of SNFAs back to the original borrower or to related parties.
Valuation and Accounting Treatment
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 treated as Gross NPAs, Net NPAs, or stressed assets, and they will be disclosed separately under specific accounting heads in bank balance sheets.
Legacy SNFAs
Legacy SNFAs outstanding in a bank’s books as of 30 September 2026 must comply with the new directions by 30 September 2027. The framework uses separate disclosure and valuation norms for these assets.
Important Facts for Exams
- The Reserve Bank of India was established in 1935 and is India’s central bank.
- Non-performing asset is a banking term used for a loan on which interest or principal remains overdue beyond the prescribed period.
- Regional Rural Banks were created under the Regional Rural Banks Act, 1976.
- Small Finance Banks are a category of scheduled banks in India under RBI licensing norms.
