RBI bans banks from selling and recognizing income on assets from stressed loans

The Reserve Bank of India has issued final prudential norms for commercial banks, small finance banks and non‑banking financial companies that acquire specified non‑financial assets (SNFAs) in resolution of stressed loans. Effective 1 October 2026, the rules prohibit banks from selling any SNFA back to the defaulting borrower or related parties, and they forbid the recognition of unrealised interest or charges as income when such assets are acquired. Any unrealised income already booked on SNFAs held as of 30 September 2026 must be reversed by 30 September 2027. The RBI also mandates that SNFAs be revalued at least biennially on a distress‑sale basis, with valuation gains ignored and losses recognised immediately. Lenders must dispose of SNFAs within seven years, preferably via public auctions, and disclose them separately on balance sheets. Board‑approved policies covering acquisition limits, eligibility, and disposal procedures are required, aiming to ensure uniform accounting and prudent treatment of these assets.