RBI drafts banks' seized assets rules, bans resale to borrowers
The RBI is rolling out draft rules for how banks handle things like properties they take over from unpaid loans.
Basically, banks can only keep these assets to recover bad loans, and they have to sell them within seven years.
Selling back to the original borrower or related parties? That is a no-go.
If you have thoughts on these rules, you can send feedback until May 26.
RBI requires distress sale valuations biennially
Banks will need to check the value of these assets every two years using "distress sale" prices — so what they would actually get if forced to sell quickly.
If values drop, that loss hits their profits right away; if values rise, it does not count as a gain.
Assets not sold in seven years get labeled as deemed as being employed for the financial institutions own use.
The RBI says all this should make things more transparent, and help banks focus on recovering bad loans efficiently.