RBI notifies amendments prescribing prudential norms for Specified Non-Financial Assets acquired by NBFCs

The Reserve Bank of India (“RBI”) has notified the following Amendment Directions for NBFCs-

• RBI (Non-Banking Financial Companies – Resolution of Stressed Assets) Second Amendment Directions, 2026 and
• the RBI (Non-Banking Financial Companies – Income Recognition, Asset Classification and Provisioning) Third Amendment Directions, 2026 (“Amendment Directions”).

These Amendment Directions introduces prudential framework governing Specified Non-Financial Assets (“SNFAs”). This is effective from 1^st October 2026.

Key Highlights:

A. RBI (Non-Banking Financial Companies – Resolution of Stressed Assets) Second Amendment Directions, 2026 –

1. Introduces the concept of SNFAs, defining them as immovable assets acquired by an NBFC in full or partial satisfaction of its claims on a borrower.
2. Requires every NBFC to frame a Board-approved policy governing acquisition and disposal of SNFAs, including limits on SNFA holdings, eligibility criteria, delegation of powers, recovery efforts before acquisition, and a maximum disposal period not exceeding 7 years.
3. It prescribes that an SNFA should be deemed to have been acquired only if the title of the asset is transferred in the name of the NBFC, and the NBFC is in a clear position to deal with the asset on its own.
4. Permits acquisition of SNFAs only where the borrower exposure has been classified as a Non-Performing Asset (“NPA”). Partial extinguishment of exposure will be treated as restructuring, and the remaining exposure will attract the prudential treatment applicable to restructuring.
5. Mandates disposal of SNFAs within the period specified in the NBFC’s policy, subject to an outer limit of 7 years, and requires NBFCs to make all reasonable efforts to dispose of such assets through public auction, following the principles laid down under the SARFAESI Act, 2002.
6. Prohibits sale of SNFAs back to the borrower or its related parties, including after the asset ceases to be classified as an SNFA.
7. A NBFC shall report the details of the SNFAs as per the formats provided in the Annex-2, in CIMS portal. In case of NBFC-HFCs, the details may be furnished to National Housing Bank (NHB).

B. RBI (Non-Banking Financial Companies – Income Recognition, Asset Classification and Provisioning) Third Amendment Directions, 2026 –

1. Introduces income recognition norms by prohibiting recognition of any accrued but unrealised interest or charges relating to periods prior to acquisition of an SNFA. Where such income has been recognised in respect of any SNFA outstanding in the books of a NBFC as on September 30, 2026, it should be reversed through Profit and Loss account, latest by September 30, 2027, to the extent remaining unrealised as on that date.
2. Requires any income received from an SNFA to be recognised in the income statement as ‘non-interest / other income’, in the financial year in which it is realised. Similarly, any expense incurred towards upkeep of an SNFA should be accounted for in the income statement in the financial year in which it is incurred.

Source: Reserve Bank of India