Important Key Points about SARFAESI Act, 2002

Important Key Points about SARFAESI Act, 2002

Introduction:

SARFAESI (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest) Act, 2002 is an act which came in 2002 to allow banks and other financial institutions to recuperate their Non-Performing Assets (NPAs) or bad loans without the intervention of the Court. The Act provides three alternative methods for recovery for non-performing assets –

• Enforcement of Security Interest Act, 2002 without the intervention of the Court 
• Securitization 
• Asset Reconstruction (Reconstruction & Financial) 

The Central Government has prescribed Security Interest (Enforcement) Rules, 2002 following to the powers conferred on it under the SARFAESI Act. The foregoing enforcement measures must be exercised by a secured creditor in accordance with the Enforcement Rules and are further subject to guidelines issued by the RBI.

Important Rules:

The SARFAESI Act provides for the manner for enforcement of security interests by a secured creditor without the intervention of a court or bench. If any borrower fails to discharge his liability in repayment of any secured debt within 60 days of notice from the date of notice by the secured creditor, the secured creditor is conferred with powers under the Act to –

1. Require any person, who has acquired any of the secured assets from the borrower and from whom money is due to the borrower, to pay the secured creditor so much of the money as if enough to pay the secured debt. 
2. Take possession of the secured assets of the borrower, including transfer by way of lease, assignment or sale, for realizing the secured assets 
3. Appoint any person to manage the secured assets possession of which is taken by the secured creditor, and 
4. Takeover of the management of the business of the borrower including the right to metastasis by way of lease, assignment or sale for realizing the secured assets; 

Recover Loan Procedure:

• When a customer takes a loan against mortgaging any property, he/her himself/herself owns the possession of the property. 
• When a loan becomes a Net Performing Assets (NPA), a notice is issued to the customer. 
• After this also customer does not give back the amount, the bank takes possession of the assets being mortgaged. 
• Then this bank gives advertisement in one Newspaper giving details about the property. 
• And other information about auction and invite bids from the people.