RBI releases norms for banks holding non financial assets
May 05, 2026
The Reserve Bank of India has released new draft rules. Banks can now hold specific non-financial assets only to recover bad loans. These assets must be sold within seven years. Selling them back to borrowers is prohibited. This aims for transparency and better recovery. The rules are open for public comment until May 26.
Synopsis
The Reserve Bank of India has released new draft rules. Banks can now hold specific non-financial assets only to recover bad loans. These assets must be sold within seven years. Selling them back to borrowers is prohibited. This aims for transparency and better recovery. The rules are open for public comment until May 26.
The Reserve Bank of India (RBI) has said that specified non-financial assets, such as immovable property, can be held on the books of banks and financial services companies only if they are acquired as part of a recovery strategy to resolve a non-performing loan.
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In draft norms released on Tuesday, the regulator has also prohibited banks from selling these assets back to the borrower or related parties to recover dues. A controlled and timely disposal of specified non-financial assets (SNFAs), on an arm’s-length basis, may enable regulated entities (REs) to maximise net recoveries while ensuring transparency and prudence in the recovery process, the RBI said in draft norms comments on which can be sent by May 26.
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The RBI has set a maximum period of seven years for REs to dispose-off these non-financial assets. “Post-acquisition, SNFA shall be revalued at least once every two years on 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 profit and loss statement immediately,” RBI said adding that 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 net book value (NBV).
In case REs fail to dispose off these assets within seven years or before the carrying value becomes zero, whichever is earlier, the SNFA shall be deemed as being employed for the financial institutions own use, RBI said.
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SNFAs cannot be included in the total stock of residual exposure, NPA, stressed exposures and provisioning coverage ratio but in a separate accounting head in the balance sheet of the RE, such as ‘non-banking assets acquired in satisfaction of claims’ or ‘Specified Non-Financial Assets’ or ‘other assets’, RBI said.
“In cases involving partial extinguishment of claims, the residual exposure shall be treated as restructured and shall be subject to the applicable prudential requirements,” RBI said.
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The Reserve Bank of India has released new draft rules. Banks can now hold specific non-financial assets only to recover bad loans. These assets must be sold within seven years. Selling them back to borrowers is prohibited. This aims for transparency and better recovery. The rules are open for public comment until May 26.
The Reserve Bank of India (RBI) has said that specified non-financial assets, such as immovable property, can be held on the books of banks and financial services companies only if they are acquired as part of a recovery strategy to resolve a non-performing loan.
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In draft norms released on Tuesday, the regulator has also prohibited banks from selling these assets back to the borrower or related parties to recover dues. A controlled and timely disposal of specified non-financial assets (SNFAs), on an arm’s-length basis, may enable regulated entities (REs) to maximise net recoveries while ensuring transparency and prudence in the recovery process, the RBI said in draft norms comments on which can be sent by May 26.
Also Read: RBI rate cuts partly passed on to borrowers in FY26, lending rates fall but not fully: Report
The RBI has set a maximum period of seven years for REs to dispose-off these non-financial assets. “Post-acquisition, SNFA shall be revalued at least once every two years on 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 profit and loss statement immediately,” RBI said adding that 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 net book value (NBV).
In case REs fail to dispose off these assets within seven years or before the carrying value becomes zero, whichever is earlier, the SNFA shall be deemed as being employed for the financial institutions own use, RBI said.
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SNFAs cannot be included in the total stock of residual exposure, NPA, stressed exposures and provisioning coverage ratio but in a separate accounting head in the balance sheet of the RE, such as ‘non-banking assets acquired in satisfaction of claims’ or ‘Specified Non-Financial Assets’ or ‘other assets’, RBI said.
“In cases involving partial extinguishment of claims, the residual exposure shall be treated as restructured and shall be subject to the applicable prudential requirements,” RBI said.
(You can now subscribe to our Economic Times WhatsApp channel)
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