The Reserve Bank of India’s composite Financial Inclusion Index (FI-Index) rose to 70 in March 2026, up from 67 in March 2025, marking steady progress in making formal financial services accessible across the country. In a separate but significant regulatory move, the RBI issued final prudential norms governing Specified Non-Financial Assets (SNFAs) acquired by banks and other regulated entities during the resolution of distressed loans. The new framework, which comes into effect on October 1, 2026, aims to bring transparency and discipline to how lenders handle immovable properties taken over from defaulting borrowers.
What Is the Financial Inclusion Index?
The Financial Inclusion Index (FI-Index) is a composite measure introduced by the RBI in August 2021 to track the reach and depth of formal financial services across India. It was developed in consultation with the government and other financial sector regulators and is published annually in July. The index covers 97 indicators spread across banking, investments, insurance, pension, and postal sectors, giving a holistic picture of how well the formal financial system is serving the population.
The FI-Index has three parameters, each with a specific weight:
| Parameter | Weight | What It Measures |
|---|---|---|
| Access | 35% | Availability of banking outlets, ATMs, bank branches, and digital access points |
| Usage | 45% | How widely people use banking, credit, insurance, pension, and investment services |
| Quality | 20% | Financial literacy, consumer protection, service equity, and grievance redressal |
The index is measured on a scale of 0 to 100, where 0 represents complete financial exclusion and 100 represents full inclusion. A distinctive feature of this index is that it has no base year; instead, it reflects cumulative progress over time, with each year’s value built on the previous year’s results.
How India’s FI-Index Has Progressed
The FI-Index has recorded consistent improvement since its first publication. The index stood at 53.9 in March 2021, the year it was introduced, and has climbed steadily since then. It rose to 56.4 in 2022, 60.1 in 2023, and 64.2 in 2024, before reaching 67 in 2025 and 70 in 2026.
The 4.48% increase in FY26 was driven by growth across all three sub-indices, with the Usage parameter contributing the most. This suggests that financial inclusion in India is deepening, not just widening; more people are not only opening bank accounts but actively using credit, insurance, and investment products. The Quality parameter, which tracks financial literacy and consumer protection, has also improved, reflecting the impact of sustained financial education campaigns and stronger grievance redressal mechanisms.
Several government initiatives have contributed to this upward trend. The PM Jan Dhan Yojana, launched in 2014, brought millions of unbanked households into the formal banking system. The Direct Benefit Transfer (DBT) framework ensured that government subsidies reached beneficiaries directly through bank accounts, driving account usage. The UPI ecosystem, now the world’s largest real-time payment system, dramatically expanded digital financial transactions. The Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY) extended insurance coverage to low-income groups, while the Atal Pension Yojana (APY) brought pension coverage to the unorganised sector.
What Are Specified Non-Financial Assets?
Specified Non-Financial Assets (SNFAs) are immovable properties that lenders acquire from borrowers who have defaulted on their loans. When a loan turns into a non-performing asset (NPA), the lender may take possession of the mortgaged property to recover the outstanding dues. Such properties, once taken over, are classified as SNFAs.
Examples of SNFAs include residential buildings, commercial properties, industrial land, and other real estate that banks accept in full or partial settlement of a borrower’s debt. These assets are incidental to the lending business, which is why the RBI felt the need to prescribe a separate prudential framework for them rather than treating them like regular financial assets.
The new norms have been issued as amendments to the existing Resolution of Stressed Assets Directions, 2025 and cover all major regulated entities: commercial banks, small finance banks, urban cooperative banks, NBFCs (including housing finance companies), and all India financial institutions. They also amend the corresponding Income Recognition, Asset Classification and Provisioning (IRACP) Directions to align accounting standards with the new framework.
Why the RBI Issued the SNFA Framework
Before this framework, there was no uniform set of rules governing how lenders should acquire, value, hold, and dispose of immovable assets obtained from defaulting borrowers. Different institutions followed different practices, leading to inconsistencies in valuation, accounting treatment, and disclosure. This made it difficult for the regulator to monitor such assets and for stakeholders to assess the true financial health of lending institutions.
The core problem the RBI sought to address was the practice where defaulting borrowers, after wilfully defaulting on loans, would reacquire their own assets at a discounted price through related parties or shell entities. This created a moral hazard: borrowers could walk away from loan obligations, let the bank take over the property, and then buy it back at a lower price through an associate. The new framework closes this loophole by explicitly prohibiting the sale of SNFAs back to the original borrower or their related parties.
The framework also addresses valuation inconsistencies. In the absence of standard rules, some lenders valued acquired properties at inflated figures, masking the true extent of their stressed asset exposure. By mandating conservative valuation methods, the RBI aims to ensure that bank balance sheets reflect a more realistic picture of asset quality.
Key Provisions of the SNFA Framework
The new framework establishes a comprehensive set of rules covering the entire lifecycle of an SNFA, from acquisition to disposal. Here are the key provisions.
Acquisition Conditions
An SNFA can be acquired only after the borrower’s loan has been officially classified as a non-performing asset (NPA). The acquisition must be on a non-recourse basis, meaning the lender cannot pursue the borrower for the remaining debt after taking the property. The property can be acquired either through a full settlement (where the entire outstanding claim is extinguished) or a partial settlement (where only part of the loan is settled through the property transfer).
In cases of partial extinguishment, the remaining loan exposure must be treated as a restructured asset and will continue to attract applicable prudential norms on restructuring. This ensures that banks do not use property acquisition as a way to sidestep proper provisioning requirements.
Valuation Rules
The RBI has introduced strict valuation norms to prevent overvaluation. At the time of acquisition, an SNFA must be recorded in the balance sheet at the lower of two values: the net book value (NBV) of the extinguished loan exposure or the distress sale value (DSV) of the property. The DSV must be determined by at least two independent external valuers.
Subsequently, at every reporting date, the SNFA value must be updated based on the revised NBV of the extinguished exposure, as if the loan had continued on the lender’s books. If the value declines, the loss must be recognised immediately in the profit and loss account.
Holding Period and Disposal
Every regulated entity must formulate a Board-approved policy governing SNFA acquisition and disposal. This policy must specify limits on SNFAs as a proportion of total assets, eligibility criteria, delegation of approval powers, and a maximum disposal timeline. The RBI has capped the maximum holding period at seven years.
Lenders are directed to make all efforts to sell SNFAs at the earliest through public auctions, following the auction principles laid down under the SARFAESI Act, 2002. The most significant restriction is that SNFAs cannot be sold back to the original borrower or their related parties, as defined under the Insolvency and Bankruptcy Code (IBC), 2016. This restriction applies even if the asset later ceases to be classified as an SNFA. If a lender chooses to use an acquired property for its own operations, it will cease to be classified as an SNFA and will instead be recognised as a fixed asset.
Disclosure and Reporting
SNFAs will not form part of Gross NPA, Net NPA, stressed exposures, or the Provisioning Coverage Ratio. Instead, they must be disclosed separately in the balance sheet under a dedicated accounting head: “non-banking assets acquired in satisfaction of claims.” Regulated entities must also submit detailed annual reports on SNFAs through the RBI’s Centralised Information Management System (CIMS) portal, including data on acquisitions, disposals, age-wise classification, and properties put to the lender’s own use.
Transition for Legacy Assets
All SNFAs already held in lenders’ books as of September 30, 2026, must be brought into compliance with the new framework by September 30, 2027. Additionally, any accrued but unrealised interest or charges relating to extinguished loans that have already been recognised as income for legacy SNFAs must be reversed through the profit and loss account by the same date. Income generated from an SNFA will be recognised as non-interest or other income only in the financial year in which it is actually realised, while maintenance expenses will be recognised when incurred.
Key Takeaways
- The RBI’s Financial Inclusion Index (FI-Index) rose to 70 in March 2026, up from 67 in March 2025, marking consistent progress since its introduction in August 2021.
- The FI-Index measures financial inclusion across 97 indicators in banking, investment, insurance, pension, and postal sectors, with three parameters: Access (35%), Usage (45%), and Quality (20%).
- The index has no base year and is measured on a scale of 0 to 100, reflecting cumulative progress over time.
- The RBI issued final prudential norms on Specified Non-Financial Assets (SNFAs) under the Resolution of Stressed Assets Directions, 2025, effective October 1, 2026.
- SNFAs are immovable properties acquired by lenders from defaulting borrowers. The framework prohibits selling them back to the original borrower or related parties, closing a major moral hazard loophole.
- The maximum holding period for an SNFA is capped at seven years, and disposal must be through public auctions following SARFAESI Act, 2002 principles.
- Legacy SNFAs held as of September 30, 2026 must comply with the new framework by September 30, 2027.
