Brief Overview:
RBI has issued Prudential Norms on Specified Non-Financial Asset acquired by Regulated Entities (“REs”). REs holding immovable assets acquired as part of satisfaction of claims against a borrower would be required to follow the dedicated framework issued for SNFAs effective from 1st October 2026.
Technical Details:
1) What is a specified non-financial asset (“SNFA”)?: Immovable asset acquired by REs in satisfaction or part satisfaction of its claims on the borrower, including non-banking assets.
2) REs’ policy to be SNFA compliant: Policy to have clauses for acquisition of SNFA with a maximum disposal window of 7 (seven) years.
3) Compliance window: Any SNFA, including those acquired through bilateral acquisitions or under SARFAESI Act outstanding in the books of REs as on 30th September 2026 need to comply by 30th September 2027.
4) Acquisition and title to SNFA: May be acquired from the borrower against full or partial extinguishment of RE’s exposure on a non-recourse basis.
5) Partial extinguishment of exposure to be treated as restructuring and balance exposure to attract the prudential treatment applicable to restructuring.
6) Disposal of SNFAs: (a) Disposal efforts to be done at the earliest through a public auction. (b) No sale back to the borrower or its related parties. (c) A SNFA put to RE’s own use shall cease to be a SNFA from the date of being put to use.
JC Takeaways:
This policy imposes a time bound disposal requirement and will compel REs to periodically review their SNFA portfolios. No sale back to the borrower or its related parties runs the risk of being struck down on grounds of creating a Clog on the Equity of Redemption. Further, permitting REs to put a SNFA for their own use is at odds with the observations in PTC India Financial Services (although it was in the context of pledge of shares) that the pledged goods cannot be sold by the pledgee to itself.
For further details, please see:
Prudential Norms on Specified Non Financial Asset acquired by Regulated Entities
For any queries/clarifications, please feel free to ping us and we will be happy to chat:
- Jayesh H (jayesh.h@juriscorp.in)
● Aditi Sinha (aditi.sinha@juriscorp.in)
