8) SARFAESI Act

Question 1

SARFAESI full form ?

Answer 1

Securitization And Resconstruction of Financial Assets and Enforcement of Security Act

Question 2

Context ?

Answer 2

SC has ruled that SARFAESI Act of 2002 applies to Cooperative banks as well

Question 3

Story of SARFAESI ?

Answer 3

Around 1980-1990 , lot of corporate companies, big entities would take huge amount of loans from banks but would defer from paying back. In case of bank forcing them to payback, they would file some case on the bank at Civil court which has huge amount of pending cases. In order to curb this, in 1994 Govt established Debt Recovery tribunals. However this also saw a huge burden of cases. Finally they came up with SARFAESI.

Question 4

How did SARFAESI improve the condition ?

Answer 4

Under SARFAESI Act, Banks are given great power. They can sell the underlying asset of the loan, or tranfer the administration of an asset to another investment region. Thus banks had better power to curb NPA’s

Question 5

SO what does SARFAESI Act promote ?

Answer 5

Setting up of Asset Reconstruction Companies (ARC’s) and Securitization Companies (SC’s) to deal with NPAs accumulated with the banks and financial institutions

Question 6

What is one exception under this ?

Answer 6

If agricultural land is kept to take loan, banks cannot sell it