RBI clarifies prudential norms for RRBs on non-financial assets

Notifications - Reserve Bank of India Skip to main content Selected Selected Change Language हिंदी Search the Website Search Home About Us ▼ About Us Organisation & Functions ▶ Organisation Structure Departments Offices Training Establishment ▶ College of Agricultural Banking Reserve Bank Staff College College of Supervisors RBI's Functions and Working Governors Deputy Governors Executive Directors Communication Policy of RBI Sources of Information ▶ Annual Publications Half-yearly Publications Quarterly Publications Monthly Publications Weekly Publications Occasional Publications SDDS NSDP Data Releases Publications available on Subscription General Information RBI History Museum ▶ The RBI Museum RBI Monetary Museum Notification ▼ Notifications Master Directions Master Circulars Amendment Directions Draft Notifications/Guidelines ▶ Draft Notifications/Guidelines Draft Directions (RE-wise) Index To RBI Circulars Standalone Circulars Circulars Withdrawn Press Releases Speeches & Media Interactions ▼ Speeches Media Interactions Memorial Lectures Podcasts Publications ▼ Biennial Annual Half-Yearly Quarterly Bi-monthly Monthly Weekly Occasional Reports Working Papers Legal Framework ▼ Act Rules Regulations Schemes Research ▼ External Research Schemes RBI Occasional Papers Working Papers RBI Bulletin History DRG Studies KLEMS State Statistics and Finances Statistics ▼ Data Releases Database on Indian Economy Public Debt Statistics Regulatory Reporting ▼ List of Returns Data Definition Validation rules/ Taxonomy List of RBI Reporting Portals FAQs of RBI Reporting Portals Home Notifications Notifications ( 503 kb ) Reserve Bank of India (Regional Rural Banks – Resolution of Stressed Assets) Second Amendment Directions, 2026 RBI/2026-27/193 DOR.STR.REC.174/21-04-048/2026-27 July 16, 2026 Reserve Bank of India (Regional Rural Banks – Resolution of Stressed Assets) Second Amendment Directions, 2026 Please refer to Reserve Bank of India (Regional Rural Banks – Resolution of Stressed Assets) Directions, 2025 (hereinafter referred to as ‘the Directions’). 2. A bank generally does not transact in immovable assets as part of its core business operations, other than in exceptional cases where it acquires such immovable assets in satisfaction of its claims on the borrower. In order to provide clarity on the prudential treatment of such specified non-financial assets including non-banking assets (NBAs), acquired by a bank through various mechanisms, it has been decided to issue prudential norms applicable in such cases. 3. On examination of the feedback received on the draft Directions issued on May 5, 2026 and in exercise of the powers conferred by the sections 21 and 35A of the Banking Regulation Act, 1949 and all other laws enabling the Reserve Bank of India (hereinafter called the Reserve Bank) in this regard, the Reserve Bank being satisfied that it is necessary and expedient in the public interest so to do, hereby issues the Amendment Directions hereinafter specified. 4. These Amendment Directions modify the Directions as under: i. Paragraph 4(2B) shall be inserted as below: (2B) ‘specified non-financial asset’ (SNFA) means an immovable asset acquired by a bank in satisfaction or part satisfaction of its claims on the borrower, including non-banking assets (NBAs) acquired in terms of the relevant provisions of the Banking Regulation Act, 1949. ii. Paragraph 7B shall be inserted as below: 7B. A bank’s policy shall incorporate suitable clauses for acquisition of an SNFA and disposal thereof. Such provisions shall specify inter-alia the limit on SNFAs as a share of total assets, eligibility criteria, delegation matrix, recovery efforts to be explored before acquisition and maximum period for disposal not exceeding seven years. iii. A new Chapter V-A as under shall be inserted: Chapter V-A – Prudential Norms on Specified Non-financial Assets 48A. The provisions of this Chapter shall cover all SNFAs including those acquired through bilateral acquisitions or through Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. 48B. In respect of any SNFA outstanding in the books of a bank as September 30, 2026 (‘Legacy SNFAs’), compliance with these Directions shall be achieved latest by September 30, 2027. 48C. An SNFA shall be deemed to have been acquired only if the title of the asset is transferred in the name of the bank, and the bank is in a clear position to deal with the asset on its own. 48D. SNFA shall be acquired only in cases where a bank’s exposures to a borrower is classified as non-performing. 48E. SNFA may be acquired from the borrower against full or partial extinguishment of the bank’s exposure on a non-recourse basis. 48F. Partial extinguishment of exposure shall be treated as restructuring and the residual exposure to the borrower shall attract the prudential treatment applicable to restructuring as contained in these Directions A. Valuation 48G. Upon acquisition, SNFA shall be recorded in the balance sheet at the lower of the net book value (NBV) of the extinguished exposure or the distress sale value of the SNFA arrived by at least two independent external valuers. 48H. In case of partial extinguishment, the NBV of the extinguished exposure shall be calculated on a proportionate basis, i.e., as a proportion of the share of extinguished debt. Illustratively: • Suppose that the loan outstanding as of March 31, 2026 is ₹2 lakhs, on which the bank is maintaining 10% specific provisions. NBV for the total loan is ₹1.8 lakhs. • Out of the total loan outstanding, say ₹1.5 lakhs (75%) is sought to be extinguished by acquisition of a SNFA, with a DSV of ₹1.4 lakhs. • Then immediately upon acquisition: Residual value of the loan on the books of the bank shall be reduced to ₹0.5 lakhs with associated specific provision of ₹0.05 lakhs SNFA shall be valued at the lower of (DSV, NBV), where NBV shall be calculated on a proportionate basis, i.e. (75% of 1.8) = ₹1.35 lakhs. 48I. At each subsequent reporting date, the SNFA shall be carried on the balance sheet at the revised NBV. The revised NBV of the SNFA shall be the value of extinguished exposure, net of the notional provisions applicable, had the exposure continued on the books of the bank. In case of partial extinguishment, the revised NBV of the SNFA shall be the extinguished fraction of the NBV of the original exposure. B. Disposal of SNFAs 48J. A bank shall dispose of the SNFA within the maximum period of disposal as envisaged in the bank’s policy, subject to a maximum period of seven years. 48K. A bank shall make all efforts to dispose of the SNFA at the earliest through a public auction. For the purpose of public auction, a bank shall adhere with the principles of auction enshrined in the SARFAESI Act, 2002. 48L. The SNFA shall not be sold back to the borrower or its related parties. Related parties shall have the same meaning as defined in the Insolvency and Bankruptcy Code, 2016. This restriction on sale back to borrower or its related parties shall continue to be adhered to, even in cases where the SNFA has ceased to be an SNFA in terms of paragraph 48M below. 48M. A SNFA put to the bank’s own use shall cease to be classified as an SNFA from the date of being put to use and shall be recorded under the accounting head ‘Fixed assets’ or under any other relevant accounting head. C. Disclosure Requirements 48N. SNFAs shall not be included in the total stock of residual exposure / Gross NPA / Net NPA / Stressed exposures / Provisioning Coverage Ratio. The same shall be disclosed under the relevant accounting head in the balance sheet of the bank as ‘non-banking assets acquired in satisfaction of claims’. 48O. A bank shall report the details of the SNFAs as per the formats provided in the Annex-2 , to NABARD. 6. These Directions shall come into force with effect from October 1, 2026. 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Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2026-27/193 · issued FY 2026-27. The plain-English explanation above is BankPulse’s own independent summary.

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