SARFAESI Act, 2002

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 is an important legislation enacted by the Government of India to empower banks and financial institutions to recover non-performing assets (NPAs) without the intervention of the court.

This act plays a crucial role in strengthening the financial system and improving the efficiency of the recovery process.
Objective of the SARFAESI Act

The main purpose of the SARFAESI Act is to:

    Empower banks to recover their dues efficiently from defaulting borrowers.

    Minimize delays in recovery through a non-judicial process.

    Facilitate the securitization and reconstruction of financial assets.

    Improve credit discipline and reduce bad loans in the banking sector.

Key Features

    Enforcement of Security Interest: If a borrower defaults on a loan, banks can issue a notice and take possession of secured assets like property, machinery, etc., to recover dues.

    No Court Intervention Required: Banks do not need to approach the court to enforce their security rights, making the recovery process faster.

    Securitisation and Reconstruction: Financial assets of banks can be sold to Asset Reconstruction Companies (ARCs) to clean up their balance sheets.

    Applicable Loans: The act applies to secured loans with outstanding amounts of ₹1 lakh and above and where the loan has been classified as an NPA.

Process Under SARFAESI

    Notice of Default: The borrower is given a 60-day notice to repay the dues.

    Possession of Asset: If dues are not cleared, the bank may take possession of the secured asset.

    Sale of Asset: The asset may be auctioned to recover the dues, following due process and valuation.

Rights of Borrowers

    The borrower has the right to object or make representations within the notice period.

    They may also file an appeal with the Debt Recovery Tribunal (DRT) if they are aggrieved by any action taken under the Act.

    Borrowers must be given fair opportunity before their property is taken over or sold.

Transparency and Compliance

At Quilon Co-operative Urban Bank Ltd., we strictly adhere to the provisions of the SARFAESI Act while ensuring fairness, transparency, and respect towards our customers. Recovery under SARFAESI is always treated as a last resort, and we make every attempt to resolve matters amicably before initiating action.