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New Delhi: The Reserve Bank of India (RBI) on Thursday said banks that acquire immovable property in exceptional recovery cases cannot sell such assets back to the borrower or related parties.
The central bank noted that regulated entities are ordinarily not expected to come into possession of non-financial assets as part of their lending operations. However, in exceptional cases where exposures turn non-performing and legal or contractual remedies are invoked, banks may acquire ownership of immovable assets furnished as collateral as part of a recovery strategy.
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To bring clarity to the prudential treatment of such non-financial assets, including non-banking assets acquired through various mechanisms, the RBI has issued fresh norms.
A bank must dispose of the specified non-financial asset within the maximum period laid down in its policy, subject to an upper limit of seven years, the RBI said. It added that lenders should make all efforts to sell such assets at the earliest through public auction.
The central bank had issued draft norms in May and sought stakeholder feedback. One suggestion was to allow borrowers to buy back the property. The RBI rejected this proposal, saying it could create moral hazard and weaken credit discipline by giving defaulting borrowers a preferential chance to recover the asset.
Under the RBI (Commercial Banks – Resolution of Stressed Assets) Third Amendment Directions, 2026, such assets will be recorded in the balance sheet at the lower of the net book value of the extinguished exposure or the distress sale value determined by at least two independent external valuers.
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The RBI also said that where a specified non-financial asset is put to a bank’s own use, it will no longer be treated as an SNFA from the date of use and will be classified under fixed assets or another relevant accounting head.
The directions will take effect from October 1, 2026.
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