Mumbai (Maharashtra) [India], July 16 (ANI): The Reserve Bank of India (RBI) has issued final prudential norms for banks, small finance banks (SFBs) and non-banking financial companies (NBFCs), prohibiting them from selling specified non-financial assets (SNFAs) acquired during the resolution of stressed loans back to the defaulting borrower or its related parties.

The RBI issued the amendments under the Resolution of Stressed Assets Directions, 2025 for commercial banks, small finance banks and NBFCs. The new norms will come into effect from October 1, 2026.

Under the amended directions, an SNFA refers to an immovable asset acquired by a lender in full or partial satisfaction of its claims on a borrower. For banks, the definition also includes non-banking assets (NBAs) acquired under the provisions of the Banking Regulation Act, 1949.

The RBI said, '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.'

It added that related parties will have the same meaning as defined under the Insolvency and Bankruptcy Code, 2016. The restriction will continue even if the asset later ceases to be classified as an SNFA.

The central bank said lenders generally do not transact in immovable assets as part of their core business, except when such assets are acquired in satisfaction of claims on borrowers. The new norms provide clarity on the prudential treatment of such assets.

According to the directions, SNFAs can be acquired only where the lender's exposure to a borrower has been classified as a non-performing asset.

The acquisition may take place against full or partial extinguishment of the outstanding loan on a non-recourse basis. In cases of partial extinguishment, the remaining exposure will be treated as a restructured loan and attract the applicable prudential norms.

The RBI has also directed banks, SFBs and NBFCs to frame board-approved policies covering acquisition and disposal of SNFAs. These policies should specify limits on such assets as a share of total assets, eligibility criteria, delegation of powers, recovery efforts before acquisition and a maximum disposal period of seven years.

The regulator said SNFAs must 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.

Lenders have also been asked to make all efforts to dispose of these assets through public auctions following the principles laid down under the SARFAESI Act, 2002.

The RBI further said that legacy SNFAs outstanding as on September 30, 2026 must comply with the new norms by September 30, 2027.

The directions also prescribe separate disclosure requirements for these assets. SNFAs will not form part of Gross NPA, Net NPA, stressed exposures or provisioning coverage ratio and will instead be disclosed under separate accounting heads in the balance sheets of banks, small finance banks and NBFCs. (ANI)