TITLE: India's Reserve Bank Issues Third Amendment Directions on Commercial Bank Stressed Asset Resolution
BODY:
On July 16, 2026, the Reserve Bank of India (RBI) issued the Reserve Bank of India (Commercial Banks – Resolution of Stressed Assets) Third Amendment Directions, 2026, amending the Reserve Bank of India (Commercial Banks – Resolution of Stressed Assets) Directions, 2025. The amendment introduces prudential norms governing the acquisition and disposal of specified non-financial assets (SNFAs), including non-banking assets (NBAs), by commercial banks.
The amendment defines SNFAs as immovable assets acquired by banks in satisfaction or partial satisfaction of claims on borrowers. Banks must incorporate suitable clauses in their policies specifying limits on SNFAs as a share of total assets, eligibility criteria, delegation matrices, recovery efforts before acquisition, and maximum disposal periods not exceeding seven years. SNFAs may only be acquired when a bank's exposure to a borrower is classified as non-performing and must be acquired on a non-recourse basis. Upon acquisition, SNFAs are recorded 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. Banks must dispose of SNFAs within their policy-defined periods, subject to a maximum of seven years, primarily through public auction in accordance with the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. SNFAs cannot be sold back to borrowers or their related parties. For disclosure purposes, SNFAs are excluded from gross non-performing assets, net non-performing assets, and stressed exposures calculations, and must be reported separately in balance sheets as non-banking assets acquired in satisfaction of claims.
The directions apply to all SNFAs, including those acquired through bilateral acquisitions or SARFAESI mechanisms. Legacy SNFAs outstanding as of September 30, 2026, must achieve compliance by September 30, 2027. The amendment comes into force on October 1, 2026.