RBI proposes allowing lenders to acquire immovable assets only after NPA
May 05, 2026
RBI proposes draft norms allowing lenders to acquire collateral assets only after loans turn NPAs, aiming to improve recovery outcomes while ensuring transparency and prudence
RBI proposes draft norms allowing lenders to acquire collateral assets only after loans turn NPAs, aiming to improve recovery outcomes while ensuring transparency and prudence
BS Reporter Mumbai
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The Reserve Bank of India has proposed allowing lenders to acquire ownership of an immovable asset furnished as collateral security once the account turns non-performing. The move aims to maximise recoveries by regulated entities while ensuring transparency and prudence in the recovery process.
Commenting that lenders, in the normal course, are not expected to come into possession of non-financial assets in lieu of their regular lending operations, RBI, in draft norms issued on Specified Non-Financial Assets (SNFA) today, said, “In exceptional cases, where the exposures become non-performing and legal or contractual remedies have been invoked, REs may, as part of recovery strategy, acquire ownership of an immovable asset furnished as collateral security.”
Such assets can be acquired only in cases where a lender’s exposure to a borrower is classified as non-performing, and where other means of recovery have been explored and deemed unviable.
The draft norms said regulated entities may acquire SNFAs in lieu of full or partial extinguishment of their claims against the borrower.
“SNFA may be acquired from the borrower against full or partial extinguishment of the RE’s exposure on a non-recourse basis,” the norms said.
In cases involving partial extinguishment of claims, the residual exposure shall be treated as restructured, it said. Restructured assets attract higher provisions.
“The SNFAs shall be recorded and carried at the lower of the net book value (NBV) of the extinguished exposure or the distress sale value of the SNFA,” it said. The norms proposed a maximum holding period of seven years for such assets, in order to ensure timely disposal of such SNFAs.
The proposed norms said that post-acquisition, SNFA should be revalued at least once every two years on a distress sale basis, duly factoring in the reasons for failure to dispose of the asset earlier. “Valuation gains, if any, shall be ignored and any diminution in value shall be recognised in the profit and loss statement immediately,” it said.
Lenders are prohibited from selling the SNFA back to the borrower or to any related party of the borrower, to mitigate moral hazard, RBI said.
“At each subsequent reporting date, the SNFA shall be carried on the balance sheet at the lower of the last available distress sale value, or the revised NBV,” it said.
Feedback on these draft norms has been invited by May 26, 2026.
All SNFAs, including those acquired through bilateral acquisitions or through the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, are eligible under the new directions.
On disposal of such assets, the norms proposed that regulated entities shall make demonstrable efforts to dispose of the SNFA at the earliest through a public auction.
In case of failure to dispose of an SNFA within the maximum period of disposal, which is seven years, the SNFA shall be deemed as being employed for the RE’s own use, the norms said.
Lenders have been asked not to include SNFA as non-performing or stressed assets or under the provisioning coverage ratio. It should be disclosed as ‘non-banking assets acquired in satisfaction of claims’ or ‘Specified Non-Financial Assets’ or ‘Other Assets’.
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First Published: May 05 2026 | 9:24 PM IST
BS Reporter Mumbai
Listen to This Article
The Reserve Bank of India has proposed allowing lenders to acquire ownership of an immovable asset furnished as collateral security once the account turns non-performing. The move aims to maximise recoveries by regulated entities while ensuring transparency and prudence in the recovery process.
Commenting that lenders, in the normal course, are not expected to come into possession of non-financial assets in lieu of their regular lending operations, RBI, in draft norms issued on Specified Non-Financial Assets (SNFA) today, said, “In exceptional cases, where the exposures become non-performing and legal or contractual remedies have been invoked, REs may, as part of recovery strategy, acquire ownership of an immovable asset furnished as collateral security.”
Such assets can be acquired only in cases where a lender’s exposure to a borrower is classified as non-performing, and where other means of recovery have been explored and deemed unviable.
The draft norms said regulated entities may acquire SNFAs in lieu of full or partial extinguishment of their claims against the borrower.
“SNFA may be acquired from the borrower against full or partial extinguishment of the RE’s exposure on a non-recourse basis,” the norms said.
In cases involving partial extinguishment of claims, the residual exposure shall be treated as restructured, it said. Restructured assets attract higher provisions.
“The SNFAs shall be recorded and carried at the lower of the net book value (NBV) of the extinguished exposure or the distress sale value of the SNFA,” it said. The norms proposed a maximum holding period of seven years for such assets, in order to ensure timely disposal of such SNFAs.
The proposed norms said that post-acquisition, SNFA should be revalued at least once every two years on a distress sale basis, duly factoring in the reasons for failure to dispose of the asset earlier. “Valuation gains, if any, shall be ignored and any diminution in value shall be recognised in the profit and loss statement immediately,” it said.
Lenders are prohibited from selling the SNFA back to the borrower or to any related party of the borrower, to mitigate moral hazard, RBI said.
“At each subsequent reporting date, the SNFA shall be carried on the balance sheet at the lower of the last available distress sale value, or the revised NBV,” it said.
Feedback on these draft norms has been invited by May 26, 2026.
All SNFAs, including those acquired through bilateral acquisitions or through the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, are eligible under the new directions.
On disposal of such assets, the norms proposed that regulated entities shall make demonstrable efforts to dispose of the SNFA at the earliest through a public auction.
In case of failure to dispose of an SNFA within the maximum period of disposal, which is seven years, the SNFA shall be deemed as being employed for the RE’s own use, the norms said.
Lenders have been asked not to include SNFA as non-performing or stressed assets or under the provisioning coverage ratio. It should be disclosed as ‘non-banking assets acquired in satisfaction of claims’ or ‘Specified Non-Financial Assets’ or ‘Other Assets’.
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First Published: May 05 2026 | 9:24 PM IST