Reserve Bank of India (All India Financial Institutions – Resolution of Stressed Assets) Second Amendment Directions, 2026 · RBI/2026-27/190

RBI/2026-27/190 DOR.STR.REC.171/21-04-048/2026-27 July 16, 2026

Reserve Bank of India (All India Financial Institutions – Resolution of Stressed Assets) Second Amendment Directions, 2026

Please refer to Reserve Bank of India (All India Financial Institutions – Resolution of Stressed Assets) Directions, 2025 (hereinafter referred to as ‘the Directions’).

2. An AIFI 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 an AIFI 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 section 45L of the Reserve Bank of India Act, 1934 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(15A) shall be inserted as below:

(15A) ‘specified non-financial asset’ (SNFA) means an immovable asset acquired by an AIFI in satisfaction or part satisfaction of its claims on the borrower.

ii. Paragraph 12B shall be inserted as below:

12B. AIFI’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 VII-A as under shall be inserted:

Chapter VII-A – Prudential Norms on Specified Non-financial Assets

135A. 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.

135B. In respect of any SNFA outstanding in the books of an AIFI as on September 30, 2026 (‘Legacy SNFAs’), compliance with these Directions shall be achieved latest by September 30, 2027.

135C. An SNFA shall be deemed to have been acquired only if the title of the asset is transferred in the name of the AIFI, and the AIFI is in a clear position to deal with the asset on its own.

135D. SNFA shall be acquired only in cases where an AIFI’s exposures to a borrower is classified as non-performing.

135E. SNFA may be acquired from the borrower against full or partial extinguishment of the AIFI’s exposure on a non-recourse basis.

135F. 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

135G. 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.

135H. 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 AIFI is maintaining 15% specific provisions. NBV for the total loan is ₹1.7 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 AIFI shall be reduced to ₹0.5 lakhs with associated specific provision of ₹0.075 lakhs
  • SNFA shall be valued at the lower of (DSV, NBV), where NBV shall be calculated on a proportionate basis, i.e. (75% of 1.7) = ₹1.275 lakhs.

135I. 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 AIFI. 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

135J. An AIFI shall dispose of the SNFA within the maximum period of disposal as envisaged in the AIFI’s policy, subject to a maximum period of seven years.

135K. An AIFI shall make all efforts to dispose of the SNFA at the earliest through a public auction. For the purpose of public auction, an AIFI shall adhere with the principles of auction enshrined in the SARFAESI Act, 2002.

135L. A 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 135M below.

135M. A SNFA put to the AIFI’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

135N. 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 AIFI as ‘‘Specified Non-Financial Assets’, in accordance to the applicable regulations and accounting standards.

135O. An AIFI shall report the details of the SNFAs as per the formats provided in the Annex-2, in CIMS portal.

6. These Directions shall come into force with effect from October 1, 2026.

(Vaibhav Chaturvedi) Chief General Manager