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The RBI has set a maximum period of seven years for REs to dispose-off these non-financial assets. “Post-acquisition, SNFA shall be revalued at least once every two years on distress sale basis, duly factoring in the reasons for failure to dispose of the asset earlier. Valuation gains, if any, shall be ignored and any diminution in value shall be recognised in profit and loss statement immediately,” RBI said adding that at each subsequent reporting date, the SNFA shall be carried on the balance sheet at the lower of the last available distress sale value, or the revised net book value (NBV).
In case REs fail to dispose off these assets within seven years or before the carrying value becomes zero, whichever is earlier, the SNFA shall be deemed as being employed for the financial institutions own use, RBI said.
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SNFAs cannot be included in the total stock of residual exposure, NPA, stressed exposures and provisioning coverage ratio but in a separate accounting head in the balance sheet of the RE, such as ‘non-banking assets acquired in satisfaction of claims’ or ‘Specified Non-Financial Assets’ or ‘other assets’, RBI said.
“In cases involving partial extinguishment of claims, the residual exposure shall be treated as restructured and shall be subject to the applicable prudential requirements,” RBI said.