What is SARFAESI Act, 2002?
The SARFAESI Act, 2002 (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act) is an Indian regulation that engages banks and monetary establishments to claim insurance when a borrower defaults on a credit. The Demonstration gives a legitimate system to the implementation of safety intrigued by these foundations without the intercession of the court. The SARFAESI Act was established by the Indian Parliament in 2002 to resolve the issue of Non-Performing Assets (NPAs) in the financial area and to speed up the recovery of contributions from defaulting borrowers. The act allows banks and other financial institutions to auction commercial or residential properties to recover a loan in those cases where the borrower fails to recover the loan amount. Thus, through recovery methods and reconstruction, the SARFAESI Act, 2002 enables banks to reduce their Non-Performing Assets (NPAs).
Key Takeaways:
- SARFAESI Act, 2002 provides power to a bank or a financial institution to seize the property of a defaulting borrower.
- In case, where the borrower fails to repay the loan amount, the financial institution classifies the account as Non-Performing Asset (NPA).
- The banks or financial institutions issue notice to the defaulting borrowers to discharge the liability within the 60-day period.
- Hence, the SARFAESI Act is regarded as a necessary step in strengthening the country’s financial institutions.
Table of Content
- SARFAESI Act: An Overview
- Procedure under the SARFAESI Act
- Offences and Penalties under the SARFAESI Act
- Conclusion
- SARFAESI Act- FAQs