The RBI has issued final prudential norms under Resolution of Stressed Assets Directions, 2025, barring banks, small finance banks, and NBFCs from selling Specified Non-Financial Assets (SNFAs) back to defaulting borrowers or their related parties as defined under IBC, 2016. SNFAs are immovable assets acquired in full or partial satisfaction of lender claims when exposure is classified NPA. The rules take effect October 1, 2026, with legacy SNFAs required to comply by September 30, 2027.

When a borrower defaults and a lender acquires immovable property — a factory, land, or building — to recover dues, that asset becomes a Specified Non-Financial Asset (SNFA). Until now, there was no explicit rule preventing lenders from quietly selling that asset back to the very defaulter who caused the stress, effectively undoing the recovery action and creating moral hazard.

The RBI's new framework closes this loophole. A defaulter or its related parties (defined per IBC, 2016 — which covers promoters, directors, subsidiaries, and persons acting in concert) cannot buy back the asset under any circumstances. Crucially, this restriction survives even if the asset later loses its SNFA classification, preventing structured workarounds.

SNFAs can only be acquired when exposure is already NPA-classified and must be on a non-recourse basis. Partial acquisitions create a restructured loan for the remaining balance, attracting full restructuring provisioning norms — so lenders cannot use partial SNFA acquisition to escape provisioning discipline.

Valuation must be at the lower of net book value of extinguished exposure or distress sale value certified by two independent external valuers — a conservative accounting approach that prevents balance sheet inflation. Disposal must happen within seven years through public auctions under SARFAESI principles. SNFAs sit outside NPA and provisioning coverage ratio calculations but require separate balance sheet disclosure — preventing both window-dressing and regulatory arbitrage.