RBI Unveils Draft Guidelines on Specified Non-Financial Assets

The Reserve Bank of India (RBI) has issued draft guidelines about how banks and other regulated financial institutions should deal with certain non-financial assets that they may receive from borrowers when loans turn into non-performing assets.

However, in some exceptional situations, when a borrower fails to repay, and all other recovery methods are not practical, the lender may take ownership of the property given as collateral to recover dues.

The RBI has called these assets “Specified Non-Financial Assets” (SNFAs). The idea behind the draft rules is to ensure that if lenders acquire such assets, they manage and sell them in a transparent, fair, and time-bound manner so that recoveries are maximised, and risks are controlled.

According to the draft guidelines, only those loans that have already become non-performing and where other recovery options have been explored and found unworkable can qualify under these rules. In such cases, the lender may accept the borrower’s property either fully or partly in settlement of the outstanding loan amount.

If the property settles only a part of the loan amount, then the remaining unpaid portion of the loan will be treated as a restructured loan.

The RBI has also prescribed how these acquired assets should be valued in the books of the lender. The asset should be recorded at whichever is lower: either the remaining book value of the loan being settled or the distress sale value of the property. Later, at every reporting date, the value must again be reviewed and carried at the lower of the updated distress sale value or the adjusted loan value after considering notional provisions.

To ensure that banks do not hold these properties for too long, the RBI has proposed a maximum holding period of seven years.

The RBI has also prohibited lenders from selling these assets back to the original borrower or to related parties connected with the borrower.

Additionally, lenders will have to disclose in their balance sheets the total amount of such SNFAs they are holding.

The RBI has invited suggestions from the public and stakeholders on these draft guidelines. Stakeholders can submit their submissions until May 26, 2026.