Reserve Bank of India (RBI) Introduces New SNFA Framework

Key facts

• The Reserve Bank of India (RBI) introduced the Specified Non-Financial Assets (SNFAs) framework for immovable assets acquired from defaulting borrowers by banks, NBFCs, and other regulated entities.
• The framework mandates that SNFAs can only be acquired when the lender's exposure to the borrower has been classified as a non-performing asset (NPA).
• SNFAs must be valued at the lower of the net book value of the extinguished exposure or the distress sale value determined by at least two independent external valuers.
• The maximum holding period for SNFAs is capped at seven years, and sale back to the original borrower or related parties is prohibited.
• SNFAs will be disclosed separately in the balance sheet and excluded from Gross NPA, Net NPA, and Provision Coverage Ratio calculations.
• The norms take effect from October 1, 2026, with legacy assets required to comply by September 30, 2027.