RBI's new SNFA rules: Banks barred from selling assets to loan defaulters

📌 Summary:

• The RBI has introduced the concept of "Specified Non-Financial Assets" (SNFAs) via the Third Amendment Directions, 2026 under its Commercial Banks-Resolution of Stressed Assets Directions, 2025
• SNFAs = immovable properties (residential, commercial, industrial land/real estate) that banks acquire when borrowers fail to repay; the framework governs how banks acquire, value, manage and dispose of them
• Acquisition rule: a bank may take an SNFA only after the loan is classified as a Non-Performing Asset (NPA), through full or partial settlement of its exposure; any remaining debt continues under restructuring norms with provisioning
• Valuation guardrail: property must be booked at the LOWER of (a) net book value of the extinguished loan or (b) distress-sale value fixed by at least two independent external valuers — curbing overvaluation on balance sheets
• Governance: every bank must frame an internal policy on eligibility, approvals, prior recovery efforts, caps relative to total assets, and disposal timelines; maximum holding period capped at 7 years
• Key prohibition: banks cannot resell repossessed property back to the original borrower or related parties, even after it ceases to be an SNFA — preventing misuse of the recovery process
• Disposal must primarily be via public auctions following SARFAESI Act, 2002 principles

🎯 UPSC Relevance: GS3 Economy — banking regulation, NPA/stressed-asset resolution, SARFAESI, transparency in recovery, financial stability

📝 Prelims Facts:

• SNFAs are governed by the RBI's Third Amendment Directions, 2026 (under the 2025 Stressed Assets Directions)
• A bank can acquire an SNFA only after the loan is classified as an NPA; maximum holding period is 7 years
• Disposal follows public-auction principles under the SARFAESI Act, 2002

🔑 Key Term: SARFAESI Act, 2002 — law allowing banks/financial institutions to recover dues by seizing and auctioning a defaulter's secured assets without court intervention.