The Reserve Bank of India (RBI) has issued final prudential norms governing Specified Non-Financial Assets (SNFAs) acquired by Urban Co-operative Banks (UCBs) and Rural Co-operative Banks (RCBs) in satisfaction of their claims against defaulting borrowers.
The norms, which will come into effect from October 1, 2026, follow stakeholder consultations on the draft directions issued in May this year.
Under the new framework, banks may acquire immovable property only where the borrower’s exposure has been classified as non-performing. Such assets must be recorded at the lower of the extinguished exposure’s net book value or the property’s distress sale value determined by at least two independent external valuers. Banks have also been required to put in place policies governing the acquisition, valuation and disposal of these assets.
The RBI has mandated that SNFAs be disposed of within a maximum period of seven years, with banks required to make all efforts to sell them at the earliest through public auction.
The assets cannot be sold back to the defaulting borrower or its related parties. Existing SNFAs in banks’ books must be brought into compliance with the new framework by September 30, 2027.
In a related move, the RBI has amended income recognition norms, clarifying that accrued but unrealised interest or charges on extinguished exposures cannot be recognised as income upon acquisition of an SNFA.
Any income realised from such assets will be recognised as non-interest (other) income only in the financial year in which it is actually received, while expenses incurred on their upkeep must also be accounted for in the year they are incurred.
