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Reserve Bank of India proposes prudential norms for non-financial assets under SNFA framework
(Anytime News Network | Pooja Srivastava)
The Reserve Bank of India (RBI) has released draft guidelines titled “Prudential Norms on Specified Non-financial Assets (SNFA) Directions,” aiming to bring greater clarity, transparency, and discipline in the handling of non-financial assets acquired by regulated entities (REs) during loan recovery processes.
Under normal circumstances, banks and financial institutions are not expected to own non-financial assets. However, in cases where loans turn non-performing and all recovery options have been exhausted, REs may take possession of immovable assets pledged as collateral. The draft norms seek to regulate such situations and ensure prudent management of these assets.
As per the proposed framework, only those exposures classified as NPAs and deemed unviable for recovery through other means will qualify for extinguishment under SNFA provisions. In cases of partial settlement, the remaining exposure will be treated as restructured and governed by existing prudential norms.
The RBI has also outlined valuation principles, stating that SNFAs should be recorded at the lower of the Net Book Value (NBV) of the extinguished exposure or the distress sale value of the asset. Furthermore, these assets must be disposed of within a maximum period of seven years to prevent long-term balance sheet stress.
To avoid moral hazard, the draft prohibits REs from selling such assets back to the original borrower or related parties. Additionally, banks will be required to disclose their SNFA holdings in financial statements, ensuring transparency for stakeholders.
The central bank has invited comments and feedback from stakeholders and the public until May 26, 2026, before finalizing the guidelines.
