RBI Announces Draft Guidelines For Acquisition Of Immovable Assets In Loan Recovery Cases

The Reserve Bank of India has on Tuesday announced draft guidelines on the acquisition of immovable properties by banks, non-banking financial companies, and other financial institutions in the process of loan recovery.

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The proposed framework, titled Prudential Norms on Specified Non-financial Assets Directions, lays down rules for the acquisition, holding, and disposal of non-financial assets taken over by lenders when borrowers fail to repay loans.

According to the Reserve Bank of India, regulated entities generally do not hold non-financial assets such as land, houses, or machinery as part of normal lending activity. However, such assets may be acquired in exceptional cases linked to loan defaults and recovery proceedings. The draft norms are open for public comments until May 26, 2026.

Assets Can Be Acquired Only In Non-Performing Accounts

The Reserve Bank of India said only loan exposures classified as non-performing assets will qualify under the proposed framework.

According to the draft rules, lenders can acquire immovable assets only after other recovery methods have been explored and found unviable.

The central bank stated that regulated entities must ensure the disposal process remains transparent, financially prudent, and conducted on an arm’s length basis to maximise recovery value. Under the proposed rules, immovable assets acquired against unpaid loans will be classified as Specified Non-financial Assets, or SNFAs.

Proposed Rules For Borrowers And Lenders

As per the drafted framework, the lender shall get these properties to settle some part or the entire outstanding amount. In case a borrower defaults on the repayment of a ₹1 crore loan, then the lender may seize the property valued at ₹1 crore, and the loan shall be completely cleared off in this way. However, in case the property does not have a higher valuation, only a partial loan would be settled through this process.

All the other outstanding amounts will continue to be considered according to the existing recovery process. As per the recommendations of the Reserve Bank of India, there is a cap of seven years on the holding period of these assets.

Lenders are barred by the draft guidelines from selling the seized asset to the defaulting borrower and his associates. As per the Reserve Bank of India, such an imposition is necessary to avoid moral hazard among borrowers.

Banking Sector And Market Context

The draft guidelines come at a time when lenders continue to focus on reducing stressed assets and improving recovery mechanisms.

Indian banking stocks witnessed gains during the latest trading session. The Nifty Bank Index rose 2.6%, while the Sensex closed at 77,958.52 and the Nifty 50 settled at 24,330.95.

The Reserve Bank of India said the proposed norms aim to provide greater clarity on prudential treatment and handling of non-financial assets acquired through loan recovery proceedings.