Banks’ have to dispose of “specified non-financial assets” acquired from a borrower within 7 years: RBI
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Reserve Bank of India
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Banks must dispose of specified non‑financial assets (SNFAs), which include non‑banking assets (NBAs), acquired from a borrower whose loan is classified as a non‑performing asset (NPA), within a maximum of seven years, as stipulated by the RBI’s amendment directions on stressed‑asset resolution.
This seven‑year limit is included in the RBI (Commercial Banks – Resolution of Stressed Assets) Third Amendment Directions, 2026, to guarantee prompt disposal of such assets.
The RBI observed that banks normally do not deal in immovable property as part of their regular business, except when they acquire such property to satisfy a borrower’s debt.
To clarify the prudential treatment of specified non‑financial assets — including NBAs — obtained by banks via various routes, the RBI has issued applicable prudential norms. These directions will take effect on 1 October 2026.
Bank’s policy
A bank’s policy must contain appropriate provisions for acquiring and disposing of an SNFA in line with the Directions.
These provisions should specify, among other things, the cap on SNFAs relative to total assets, eligibility requirements, the delegation matrix, recovery attempts to be considered prior to acquisition, and a disposal horizon not longer than seven years.
For any SNFA still on a bank’s books as of 30 September 2026 (referred to as Legacy SNFAs), compliance with these Directions must be achieved no later than 30 September 2027.
An asset counts as an acquired SNFA only when its title is transferred to the bank and the bank can independently manage the asset.
Moreover, a SNFA may be acquired solely when the bank’s exposure to the borrower is classified as non‑performing.
A SNFA can be obtained from the borrower in exchange for either full or partial cancellation of the bank’s exposure, on a non‑recourse basis.
If the exposure is only partially extinguished, the transaction is considered a restructuring; any remaining exposure to the borrower will then be subject to the prudential rules that apply to restructured assets.
Published on July 16, 2026
