Reserve Bank of India sets prudential norms for rural co-operative banks on immovable assets acquired from defaulting borrowers

The Reserve Bank of India has amended its 2025 Directions on resolution of stressed assets for rural co-operative banks to introduce prudential norms for specified non-financial assets, defined as immovable assets acquired in full or partial satisfaction of claims on a borrower, including non-banking assets. The new framework requires banks to set policy limits and governance for acquiring and disposing of these assets, and allows acquisition only where the borrower exposure is classified as non-performing. The amendments apply to all specified non-financial assets, including those acquired bilaterally or under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. On acquisition, the asset must be booked 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. Where only part of the exposure is extinguished, the transaction is treated as restructuring and the remaining exposure receives the prudential treatment applicable to restructuring. Banks must seek early disposal through public auction, with a maximum holding period of seven years, and may not sell the asset back to the borrower or related parties. These assets must be disclosed separately in the balance sheet as non-banking assets acquired in satisfaction of claims and excluded from residual exposure, gross non-performing assets, net non-performing assets, stressed exposures and provisioning coverage ratio metrics. Banks must also report details of such assets to NABARD. The amendments take effect on October 1, 2026. Assets already on banks' books as of September 30, 2026 must be brought into compliance by September 30, 2027.