The Government of India has no plans or any proposal to repeal the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI law), the Lok Sabha was informed on December 19.
About SARFAESI law
- THE SARFAESI law allows banks and financial institutions to recover their dues exceeding Rs. 1 lakh by proceeding under the provisions of the SARFAESI Act.
- The law, enacted in 2002, empowers lenders to attach the pledged assets of the borrowers in the event of non- payment of 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 Act comes into play if a borrower defaults on his or her payments for more than six 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.
