RBI Proposes Draft Guidelines for Non-Financial Asset Recovery

The Reserve Bank of India has released draft guidelines aimed at regulating how banks and NBFCs acquire immovable assets for loan recovery. The guidelines allow acquisition in exceptional cases when loans become non-performing. A seven-year holding period is proposed to ensure timely asset disposal.

The Reserve Bank of India (RBI) is stepping into the realm of immovable asset acquisition by issuing draft guidelines that seek to standardize the practice among regulated entities, including banks and Non-Banking Financial Companies (NBFCs).

These new guidelines are particularly focused on scenarios where loans become non-performing, and traditional recovery methods have proven futile. In such cases, banks and NBFCs may assume ownership of collateral properties as part of their recovery efforts.

A maximum holding period of seven years has been suggested within these draft norms to promote efficient disposal. Additionally, the RBI has prohibited the resale of assets to original borrowers or their relatives to mitigate any potential conflicts of interest.