RBI Prohibits Selling Acquired Assets Back To Defaulters

The Reserve Bank of India (RBI) has issued new prudential norms prohibiting banks, small finance banks, and non-banking financial companies (NBFCs) from selling Specified Non-Financial Assets (SNFAs) back to the original defaulting borrowers or their related parties. These assets, typically immovable properties, are those acquired by lenders in partial or full settlement of stressed loan claims. The move is designed to ensure that the resolution process for non-performing assets remains transparent and does not indirectly benefit the very parties that failed to meet their debt obligations.

These amended directions under the Resolution of Stressed Assets framework will become effective on October 1, 2026. Lenders are required to dispose of acquired assets within a maximum timeframe of seven years. Furthermore, the RBI has mandated that these assets be revalued at least every two years on a distress-sale basis. Any losses arising from these revaluations must be recognized in the profit and loss statement, whereas any valuation gains are to be ignored to prevent artificial inflation of balance sheets.

Lenders must now establish board-approved policies governing the acquisition and disposal of such assets, including clear limits on exposure and delegation of authority. Legacy assets currently outstanding as of September 30, 2026, must be brought into compliance by the same date in 2027. By forcing lenders to dispose of assets through public auctions as per the SARFAESI Act, the RBI aims to strengthen the recovery mechanism and ensure that such properties are transferred to independent third-party buyers rather than being recycled through the original defaulters.