What is the objective of The Securitization and Reconstruction of Financial Assets and Enforcement o...........

Economic Affairs Financial Markets

What is the objective of The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act?

To help banks in bad loans recovery where the loans are not backed by any security

To help banks in bad loans recovery where the loans are not backed by securities charged to the bank by way of mortgage, assignment, etc

To help banks recover their loans without the intervention of the court to a large extent

None of the above

छोटे Courses बड़े Results

Master Financial Markets

Prepare through Micro-courses

Try Now

Explanation:

The full form of SARFAESI Act as we know is Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Banks utilize this act as an effective tool for bad loans (NPA) recovery. It is possible where non-performing assets are backed by securities charged to the Bank by way of hypothecation or mortgage or assignment.
Upon loan default, banks can seize the securities (except agricultural land) without intervention of the court.
SARFAESI is effective only for secured loans where bank can enforce the underlying security eg hypothecation, pledge and mortgages. In such cases, court intervention is not necessary, unless the security is invalid or fraudulent. However, if the asset in question is an unsecured asset, the bank would have to move the court to file civil case against the defaulters.