The Reserve Bank of India has introduced a structured prudential framework for immovable properties acquired by Non-Banking Financial Companies in full or partial settlement of stressed loan exposures. Such properties are classified as Specified Non-Financial Assets, or SNFAs. The framework standardises how NBFCs acquire, value, hold, disclose, and ultimately dispose of these assets, while ensuring that recovery actions do not weaken financial discipline or distort the institution’s balance sheet. It becomes effective from October 1, 2026. SNFAs appearing in the books on September 30, 2026 will be treated as “Legacy SNFAs” and must comply with the revised requirements by September 30, 2027.
An NBFC may acquire an SNFA only when its exposure to the concerned borrower has already been classified as non-performing. The acquisition may take place against full or partial extinguishment of the outstanding debt and should generally be considered only after reasonable recovery efforts have been explored. Where the property settles only part of the debt, the residual exposure continues in the NBFC’s books and must receive the prudential treatment applicable to the remaining or restructured exposure.
Acquisition is recognised only after the legal title to the property has been transferred to the NBFC and the institution is legally capable of dealing with the asset independently. Mere possession, an agreement to transfer or the initiation of enforcement proceedings may not be sufficient. Before accepting the property, the NBFC should undertake legal due diligence, verify title and encumbrances, assess enforceability and confirm that the asset can be disposed of without unresolved restrictions.
The SNFA must be recorded at the lower of the net book value of the extinguished exposure and the property’s distress-sale value. The valuation should be supported by at least two independent external valuers. This conservative approach prevents inflated recognition of recoveries and ensures that the recorded amount reflects a realistically achievable value rather than an optimistic market estimate. In partial-settlement cases, the recognised value should be calculated proportionately according to the portion of debt extinguished.
Every NBFC should incorporate detailed SNFA provisions into its board-approved policy. The policy should prescribe eligibility conditions, authority levels, valuation procedures, recovery efforts required before acquisition, internal controls, monitoring arrangements and the maximum holding period. It should also define responsibilities across the credit, legal, finance, risk, recovery and compliance functions so that the asset remains subject to active oversight throughout its lifecycle.
SNFAs should be disposed of at the earliest practical opportunity, preferably through a transparent process such as a public auction conducted in accordance with applicable recovery laws. The maximum disposal period specified in the NBFC’s policy cannot exceed seven years. The asset should not be sold back to the defaulting borrower or any related party. Where an SNFA is subsequently used by the NBFC for its own operations, it should be reclassified under fixed assets or another appropriate accounting category.
For regulatory transparency, SNFAs must be disclosed separately in the balance sheet and excluded from Gross NPA, Net NPA, stressed-exposure and Provisioning Coverage Ratio calculations. Relevant details must also be reported through the Centralised Information Management System. Housing finance companies may furnish the prescribed information to the National Housing Bank.
The framework therefore, requires NBFCs to review their stressed-asset policies, identify legacy SNFAs, strengthen valuation and legal documentation, establish disposal timelines and align accounting and reporting systems. Its wider purpose is to promote prudent recovery, transparent valuation, timely disposal and stronger asset quality while preventing NBFCs from becoming long-term holders of non-core immovable properties.
