SARFAESI

ACT, 2002
BY Ria, Karan ,Nitin and Arshdeep

Introduction
It stands for Securitization and
Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002
The SARFAESI Act, 2002 empowers Banks /
Financial Institutions to recover their nonperforming assets without the intervention
of the Court

Objective of SARFAESI act 2002

Expeditious recovery of non-performing
assets (NPAs) of the banks and FIs.
To allow banks and financial institutions
toauction properties (residential and
commercial) when borrowers fail to repay
their loans.

When do properties fall

under this Act?
When a loan is defaulted and
certain conditions are not met,
banks declare the loan as NPA
and AUCTION it.
The provisions of this Act are
applicable only for NPA loans
with outstanding above Rs 1.00
lac. NPA loan accounts where the
amount is less than 20% of the

What the act says:

The Act empowers the Bank
To issue demand notice to the defaulting
borrower and guarantor, calling upon them
to discharge their dues in full within 60 days
from the date of the notice
To give notice to any person who has
acquired any of the secured assets from the
borrower to surrender the same to the Bank
To ask any debtor of the borrower to pay
any sum due or becoming due to the
borrower.

Example
Kotak Mahindra Bank has
served a possession notice
under the Securitization and
Reconstruction of Financial
Assets and Enforcement of
Security Interest Act, 2002
on Deccan Chronicle
Holdings Ltd, publisher of
English daily Deccan

SARFAESI in the NEWS,

.
The budget proposal to
include non-financial
companies (NBFCs) under
the SARFAESI is credit
positive for the lenders of
loans against property, a
leading rating agency,
Moodys.

to recover Non
Performing Assets [NPA]
The Act provides three alternative
methods for recovery of nonperforming assets, namely: 1. Securitization
2. Asset Reconstruction
3. Enforcement of Security without
the intervention of the Court

Securitizati
on

Meaning:
Acquisition of financial asset by
securitization company
Process where non-liquidated financial
assets are converted into marketable
securities and are sold to investors
Process of converting the receivables and
other assets into securities (placed in market
for trading)

Scheme
The company can raise funds from
QIB by formulating schemes.
Scheme invites subscription to
security receipts proposed to be
issued by such a company.
Company needs to be registered
under the companies act, 1956.
Registration from RBI is also needed.
AQualified Institutional
Buyer(QIB) is one that owns and
invests, on a discretionary basis, at
least $100 million in securities; for a