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The Reserve Bank of India (RBI) has introduced a new prudential framework for Specified Non-Financial Assets (SNFAs) under the Commercial Banks – Resolution of Stressed Assets Directions, 2025 (Third Amendment Directions, 2026). The framework prescribes uniform rules for banks acquiring, valuing and disposing of immovable assets obtained from defaulting borrowers.

What are Specified Non-Financial Assets (SNFAs)?

Specified Non-Financial Assets (SNFAs) are a new asset category introduced by the RBI. They refer to immovable properties acquired by banks in full or partial settlement of loans that have become Non-Performing Assets (NPAs).

These assets are not part of banks' regular banking business but are acquired as a recovery mechanism when borrowers default on loan repayments.

Examples include residential buildings, commercial properties, industrial land, warehouses, and other immovable assets transferred to banks in settlement of outstanding loans.

Why was the New Framework Introduced?

Earlier, banks lacked a uniform regulatory framework for handling such assets, leading to:

• Inconsistent valuation practices.
• Prolonged holding of non-core real estate assets.
• Lack of transparency in disposal.
• Divergent accounting and reporting practices.

The new framework aims to standardise the acquisition, valuation, accounting and disposal of these assets while ensuring that banks remain focused on their core lending functions.

Key Features of the Framework

An immovable property will qualify as an SNFA only after its legal ownership is transferred to the bank, and only when the underlying loan has already been classified as an NPA.

For valuation, every SNFA must be recorded at the lower of:

• The net book value of the extinguished loan, or
• The distress sale value determined independently by at least two external valuers.

Each commercial bank must formulate a Board-approved SNFA Policy covering acquisition criteria, approval mechanisms, valuation, recovery measures, disposal strategy and exposure limits.

Banks are required to dispose of SNFAs within seven years of acquisition and should make all reasonable efforts to sell them at the earliest. Disposal should primarily be through public auction, following the principles laid down under the SARFAESI Act, 2002, ensuring transparency and competitive price discovery.

To prevent misuse, banks cannot sell SNFAs back to the original borrower or related parties as defined under the Insolvency and Bankruptcy Code (IBC), 2016.

Accounting and Reporting

• SNFAs will be disclosed separately in banks' balance sheets under "Non-banking assets acquired in satisfaction of claims."
• Importantly, they will not form part of Gross NPAs, Net NPAs, stressed assets or the Provisioning Coverage Ratio (PCR).
• Banks must also submit annual SNFA-related information through the Centralised Information Management System (CIMS).

Implementation

• The framework will come into force from 1 October 2026.
• Banks holding existing SNFAs as of 30 September 2026 have a transition period until 30 September 2027 to comply with the new norms.