Banks have invoked the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act against telecom infrastructure provider GTL to recover their pending dues.
- The recovery process has been initiated by IDBI Bank on behalf of lenders, whose total exposure to GTL stood at Rs 7,250 crore as of December 31, 2021.
About Sarfaesi Act of 2002
- The Sarfaesi Act of 2002 was enacted to protect financial institutions against loan defaulters.
- To recover their bad debts, the banks under this act can take control of securities pledged against the loan, manage or sell them to recover dues without court intervention.
- The law is applicable throughout the country and covers all assets, movable or immovable, promised as security to the lender.
- The law comes into play if a borrower defaults on his or her payments for more than 6 months.
- The lender then can send a notice to the borrower to clear the dues within 60 days.
- In case that doesn’t happen, the financial institution has the right to take possession of the secured assets and sell, transfer or manage them.
- The defaulter, meanwhile, has a recourse to move an appellate authority set up under the law within 30 days of receiving a notice from the lender.
- According to a 2020 Supreme Court judgment, co-operative banks can also invoke Sarfaesi Act.
- According to the Finance Ministry, the non-banking financial companies (NBFCs) can initiate recovery in Rs 20 lakh loan default cases.
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