SALIENT FEATURES OF SARFEASI ACT

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CHAPTER-9

THE SECURITISATION & RECONSTRUCTION OF FINANCIAL ASSETS &ENFORCEMENT OF SECURITY INTEREST ACT, 2002

SARFEASI ACT

DEFINITIONS

As per section 2 of SARFEASI Act. Definitions.—(1) In this Act, unless the context otherwise requires,—

(a) “Appellate Tribunal” means a Debts Recovery Appellate Tribunal established under sub-section (1) of section 8 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993);

(b) “asset reconstruction” means acquisition by any 2[asset reconstruction company]of any right or interest of any bank or financial institution in any financial assistance for the purpose of realization of such financial assistance;

3[(ba) “asset reconstruction company” means a company registered with Reserve Bank under section 3 for the purposes of carrying on the business of asset reconstruction or securitisation, or both;]

(i) a banking company; or

(ii) a corresponding new bank; or

(iii) the State Bank of India; or

(iv) a subsidiary bank; or 4[(iva) a multi-State co-operative bank; or]

(v) such other bank which the Central Government may, by notification, specify for the purposes of this Act;

(d) “banking company” shall have the meaning assigned to it in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);

(e) “Board” means the Securities and Exchange Board of India established under section 3 of the

Securities and Exchange Board of India Act, 1992 (15 of 1992);

(f) “borrower” means any person who has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any bank or financial institution and includes a person who becomes borrower of a 1[asset reconstruction company]consequent upon acquisition by it of any ……………………

HISTORY OF SERFAESI ACT :

T he Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (also known as the SARFAESI Act) is an Indian law.

Enacted: 17th December, 2002

Commenced: 21st June, 2002

Before SARFAESI Act, recovery of debts due to Banks and financial institutions Act of 1993, was used for recovery of default
However there were several loopholes that were misused by the borrowers as well as others.
The committee recommended various new legislations to empower Banks and other financial institutions to take possession of the

NEED FOR THE LAW

The financial Indiscipline and the ever growing Nonperforming Assets (NPA) promoted in passing of Recoveries of Debts due to Banks & Financial Institutions Act, 1993, whereby Debt Recovery Tribunal was set up for recovery of NPA. However, this did not speed up the recovery process.

• Every fifth borrower is a defaulter. Thus SARFAESI Act was enacted to recover . ……………………….READ MORE

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