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MULTIPLE-CHOICE QUESTIONS WITH ANSWERS RELATED TO SARFAESI ACT, 2002

MULTIPLE-CHOICE QUESTIONS WITH ANSWERS RELATED TO SARFAESI ACT, 2002

1. What is the primary objective of the SARFAESI Act, 2002?
A. To regulate foreign investments
B. To facilitate securitization and reconstruction of financial assets
C. To promote agricultural development
D. To regulate stock market transactions

Answer: B. To facilitate securitization and reconstruction of financial assets

2. Who can initiate proceedings under the SARFAESI Act for the enforcement of security interest?
A. Only the borrower
B. Only the lender (bank or financial institution)
C. Both borrower and lender
D. Reserve Bank of India (RBI)

Answer: B. Only the lender (bank or financial institution)

3. What is the maximum time limit for the sale of immovable property by a bank under SARFAESI Act after acquiring possession of such property?
A. 1 year
B. 2 years
C. 3 years
D. 4 years

Answer: B. 2 years

4. What is the minimum outstanding debt required for a bank to issue a notice to the borrower under SARFAESI Act?
A. 10% of the principal amount
B. 15% of the principal amount
C. 20% of the principal amount
D. 25% of the principal amount

Answer: D. 25% of the principal amount

5. What does ‘NPA’ stand for in the context of the SARFAESI Act?
A. Non-Possessing Asset
B. Non-Performing Asset
C. National Possession Authority
D. None of the above

Answer: B. Non-Performing Asset

6. Which authority adjudicates disputes arising under the SARFAESI Act?
A. Debt Recovery Appellate Tribunal (DRAT)
B. Debt Recovery Tribunal (DRT)
C. Reserve Bank of India (RBI)
D. High Court of the concerned state

Answer: B. Debt Recovery Tribunal (DRT)

7. Can agricultural land be seized under the SARFAESI Act?
A. Yes, with no restrictions
B. No, it’s exempted
C. Yes, with the permission of the Reserve Bank of India
D. Yes, only with a court order

Answer: D. Yes, only with a court order

8. What is the maximum period a bank has to respond to a representation made by a borrower after receiving a notice under the SARFAESI Act?
A. 7 days
B. 15 days
C. 30 days
D. 45 days

Answer: C. 30 days

9. Which section of the SARFAESI Act deals with the right of the borrower to appeal against the actions of the bank?
A. Section 13
B. Section 17
C. Section 20
D. Section 25

Answer: B. Section 17

10. Can a borrower approach the DRT directly without responding to the bank’s notice under SARFAESI Act?
A. Yes
B. No, borrower must respond to the bank’s notice first
C. Only with RBI’s permission
D. Only with High Court’s permission

Answer: B. No, borrower must respond to the bank’s notice first

11. What does ‘Enforcement of Securities Interest’ primarily refer to in the SARFAESI Act?
A. Seizing physical assets
B. Recovering outstanding debt
C. Realizing security interest without court intervention
D. Legalizing financial securities

Answer: C. Realizing security interest without court intervention

12. Which of the following is not a security interest under the SARFAESI Act?
A. Pledge
B. Mortgage
C. Hypothecation
D. Lease

Answer: D. Lease

13. Can a borrower approach the DRT after the expiry of the 45-day period mentioned in the SARFAESI Act?
A. Yes, with permission from the RBI
B. No, the 45-day period is mandatory
C. Yes, but only with High Court’s permission
D. Yes, but only with the bank’s approval

Answer: B. No, the 45-day period is mandatory

14. Who appoints the Presiding Officer of the Debt Recovery Tribunal (DRT) under the SARFAESI Act?
A. Reserve Bank of India (RBI)
B. Central Government
C. Chief Justice of the respective High Court
D. Indian Banks’ Association (IBA)

Answer: C. Chief Justice of the respective High Court

15. Can a borrower challenge the validity of the notice issued under Section 13 of the SARFAESI Act before the DRT?
A. Yes
B. No, the notice is final
C. Only with the RBI’s approval
D. Only with the lender’s consent

Answer: A. Yes

16. Under the SARFAESI Act, what is the minimum value of the secured assets for banks to take actions without the intervention of DRT?
A. Rs. 1 crore
B. Rs. 5 lakhs
C. Rs. 10 lakhs
D. Rs. 50 lakhs

Answer: A. Rs. 1 crore

17. Can a borrower challenge the sale of the asset by the bank under SARFAESI Act?
A. Yes, only before the DRT
B. No, the sale is final
C. Yes, but only after two years from the sale date
D. Yes, only before the High Court

Answer: A. Yes, only before the DRT

18. What is the maximum time limit for the DRT to pass an order upon receipt of an appeal against actions taken by a bank under SARFAESI Act?
A. 30 days
B. 45 days
C. 60 days
D. 90 days

Answer: C. 60 days

19. Can a borrower appeal against the DRT’s order under the SARFAESI Act?
A. Yes, to the High Court
B. No, the DRT’s decision is final
C. Yes, but only to the Supreme Court
D. Yes, but only to the RBI

Answer: A. Yes, to the High Court

20. Which body regulates the functioning of Asset Reconstruction Companies (ARCs) under SARFAESI Act?
A. Reserve Bank of India (RBI)
B. Securities and Exchange Board of India (SEBI)
C. Ministry of Finance
D. Indian Banks’ Association (IBA)

Answer: A. Reserve Bank of India (RBI)

21. What is the maximum period within which an appeal against the DRT’s order under the SARFAESI Act can be filed in the High Court?
A. 30 days
B. 45 days
C. 60 days
D. 90 days

Answer: A. 30 days

22. Can a borrower approach the DRT if the bank fails to respond to the borrower’s representation within the specified time frame under SARFAESI Act?
A. Yes
B. No, only the High Court
C. Only with RBI’s permission
D. Only with the bank’s approval

Answer: A. Yes

23. Which of the following is NOT a remedy available to the borrower under SARFAESI Act?
A. Filing a representation to the bank
B. Seeking injunction from the court against asset seizure
C. Approaching Debt Recovery Appellate Tribunal (DRAT)
D. Challenging bank’s actions before the High Court

Answer: B. Seeking injunction from the court against asset seizure

24. Can a borrower approach both the DRT and the High Court simultaneously under the SARFAESI Act?
A. Yes
B. No, only one at a time
C. Yes, but with RBI’s permission
D. Yes, but only with the bank’s approval

Answer: B. No, only one at a time

25. What does the term “Financial Assets” encompass under the SARFAESI Act?
A. Loans and advances
B. Stocks and shares
C. Bonds and debentures
D. All of the above

Answer: D. All of the above

26. What action can a bank take after issuing a notice under Section 13(2) of the SARFAESI Act?
A. Directly sell the secured assets
B. Seize the assets without any notice
C. Initiate legal proceedings against the borrower
D. None of the above

Answer: A. Directly sell the secured assets

27. What is the minimum amount required for the Debt Recovery Tribunal to entertain an appeal under the SARFAESI Act?
A. Rs. 10 lakhs
B. Rs. 20 lakhs
C. Rs. 1 crore
D. Rs. 5 crores

Answer: B. Rs. 20 lakhs

28. Can the borrower approach the DRT against the classification of their asset as a Non-Performing Asset (NPA) by the bank?
A. Yes
B. No, the classification is final
C. Only with RBI’s approval
D. Only with the bank’s consent

Answer: A. Yes

29. What is the maximum tenure for asset reconstruction under the SARFAESI Act for an Asset Reconstruction Company (ARC)?
A. 5 years
B. 7 years
C. 10 years
D. 12 years

Answer: C. 10 years

30. Can the SARFAESI Act be applicable to properties held by a guarantor to secure a loan?
A. Yes
B. No, it applies only to borrowers
C. Only with RBI’s approval
D. Only with the High Court’s permission

Answer: A. Yes

31. What is the minimum percentage of outstanding debt required for a bank to issue a notice to the borrower under SARFAESI Act?
A. 10%
B. 15%
C. 20%
D. 25%

Answer: D. 25%

32. Which authority is responsible for the appointment of Recovery Officers under the SARFAESI Act?
A. Reserve Bank of India (RBI)
B. Central Government
C. Debt Recovery Tribunal (DRT)
D. State Government

Answer: B. Central Government

33. Can a borrower seek an injunction against the sale of mortgaged assets under SARFAESI Act?
A. Yes, without any conditions
B. Yes, only with the permission of the bank
C. No, unless the borrower pays off the entire outstanding amount
D. No, the Act prohibits seeking an injunction

Answer: D. No, the Act prohibits seeking an injunction

34. Which section of the SARFAESI Act deals with the consequences of non-compliance with the provision of Section 13(2)?
A. Section 13(3)
B. Section 13(4)
C. Section 13(5)
D. Section 13(6)

Answer: C. Section 13(5)

35. What is the maximum time frame for the DRT to conduct an inquiry and pass an order under the SARFAESI Act?
A. 30 days
B. 45 days
C. 60 days
D. 90 days

Answer: B. 45 days

36. Can a borrower file an appeal to the Debt Recovery Appellate Tribunal (DRAT) directly against a bank’s action under SARFAESI Act?
A. Yes, always
B. No, only after exhausting remedies with DRT
C. Yes, with RBI’s permission
D. Yes, but only with the bank’s consent

Answer: B. No, only after exhausting remedies with DRT

37. What is the duration a borrower has to approach the DRT after the receipt of the bank’s notice under SARFAESI Act?
A. 15 days
B. 30 days
C. 45 days
D. 60 days

Answer: C. 45 days

38. Can the DRT allow the sale of assets before the expiration of the 30-day period mentioned in the notice issued under SARFAESI Act?
A. Yes, if the borrower consents
B. Yes, with RBI’s approval
C. No, it requires a 30-day notice period
D. No, unless the High Court approves

Answer: C. No, it requires a 30-day notice period

39. Under SARFAESI Act, who conducts the valuation of assets before their sale?
A. Reserve Bank of India (RBI)
B. Central Government
C. Registered valuers
D. Debt Recovery Tribunal (DRT)

Answer: C. Registered valuers

40. What action can a borrower take if the bank fails to respond to their representation within the stipulated period under SARFAESI Act?
A. Approach the High Court directly
B. Wait indefinitely for the bank’s response
C. Initiate proceedings against the bank
D. Approach the Debt Recovery Tribunal (DRT)

Answer: D. Approach the Debt Recovery Tribunal (DRT)

41. What is the minimum amount of debt required for a bank to initiate the recovery process under SARFAESI Act for agricultural land?
A. Rs. 10 lakhs
B. Rs. 20 lakhs
C. Rs. 1 crore
D. Rs. 5 crores

Answer: B. Rs. 20 lakhs

42. Can a borrower approach the Debt Recovery Tribunal (DRT) after the expiry of the specified period for representation under SARFAESI Act?
A. Yes
B. No, representation period is final
C. Only with RBI’s approval
D. Only with the bank’s consent

Answer: B. No, representation period is final

43. What is the maximum time limit for the bank to respond to a borrower’s representation under the SARFAESI Act?
A. 15 days
B. 30 days
C. 45 days
D. 60 days

Answer: B. 30 days

44. Under SARFAESI Act, what is the maximum time period for the borrower to cure the default after the issuance of a notice by the bank?
A. 15 days
B. 30 days
C. 45 days
D. 60 days

Answer: D. 60 days

45. Can a borrower request a one-time settlement with the bank under SARFAESI Act?
A. Yes
B. No, it’s not permitted
C. Only with RBI’s permission
D. Only with the bank’s consent

Answer: A. Yes

46. Which section of the SARFAESI Act provides the power to banks to take possession of secured assets?
A. Section 13(2)
B. Section 13(3)
C. Section 13(4)
D. Section 13(5)

Answer: B. Section 13(4)

47. Can the borrower challenge the sale of assets by the bank under SARFAESI Act on grounds of undervaluation?
A. Yes
B. No, sale is final
C. Only with RBI’s approval
D. Only with the bank’s consent

Answer: A. Yes

48. What action can a borrower take if they disagree with the valuation of assets under SARFAESI Act?
A. File a police complaint
B. File a complaint with the High Court
C. File an appeal to the Debt Recovery Tribunal
D. Approach the Reserve Bank of India

Answer: C. File an appeal to the Debt Recovery Tribunal

49. Can the Debt Recovery Tribunal (DRT) grant an interim stay on the bank’s actions under SARFAESI Act?
A. Yes
B. No, DRT cannot grant interim stay
C. Only with RBI’s approval
D. Only with the bank’s consent

Answer: A. Yes

50. What does the term “Security Interest” mean under the SARFAESI Act?
A. Interest charged by the bank
B. Interest accrued on the loan
C. Right, title, and interest of any kind
D. Insurance on the loaned amount

Answer: C. Right, title, and interest of any kind

51. What action can a bank take upon receiving a representation from the borrower under SARFAESI Act?
A. Suspend the recovery proceedings temporarily
B. Review and reconsider its actions
C. Dismiss the representation without consideration
D. Initiate legal proceedings against the borrower

Answer: A. Suspend the recovery proceedings temporarily

52. Can a borrower challenge the classification of their account as a Non-Performing Asset (NPA) before the Debt Recovery Tribunal (DRT) under SARFAESI Act?
A. Yes
B. No, classification is final
C. Only with RBI’s approval
D. Only with the bank’s consent

Answer: A. Yes

53. What happens if a borrower doesn’t make payment within the 60-day cure period mentioned in the SARFAESI Act notice?
A. Immediate possession of assets by the bank
B. Extension of the cure period by the bank
C. Bank issues a final notice for payment
D. Legal action against the borrower

Answer: A. Immediate possession of assets by the bank

54. Can a borrower seek a review of the bank’s decision after the issuance of a notice under SARFAESI Act?
A. Yes
B. No, the notice is final
C. Only with RBI’s approval
D. Only with the bank’s consent

Answer: A. Yes

55. Which section of the SARFAESI Act provides the right of the borrower to obtain information from the bank regarding the loan account?
A. Section 13(1)
B. Section 13(2)
C. Section 13(3)
D. Section 13(4)

Answer: A. Section 13(1)

56. Can a borrower challenge the auction sale of assets by the bank under SARFAESI Act?
A. Yes, in DRT within 30 days
B. No, auction sale is final
C. Only with RBI’s approval
D. Only with the bank’s consent

Answer: A. Yes, in DRT within 30 days

57. Who has the authority to appoint the Presiding Officer of the Debt Recovery Appellate Tribunal (DRAT) under SARFAESI Act?
A. Reserve Bank of India (RBI)
B. Central Government
C. Chief Justice of India
D. Chief Justice of the respective High Court

Answer: D. Chief Justice of the respective High Court

58. Can a borrower challenge the SARFAESI Act’s application to their case on constitutional grounds before the DRT?
A. Yes
B. No, SARFAESI Act is not challengeable
C. Only with RBI’s approval
D. Only with the bank’s consent

Answer: A. Yes

59. What does “Securitization” mean in the context of the SARFAESI Act?
A. Conversion of loans into securities
B. Transfer of financial assets to a trust
C. Legal action against defaulting borrowers
D. None of the above

Answer: B. Transfer of financial assets to a trust

60. Can a borrower approach the High Court directly without going through the DRT under SARFAESI Act?
A. Yes, always
B. No, only after exhausting remedies with DRT
C. Only with RBI’s permission
D. Only with the bank’s consent

Answer: B. No, only after exhausting remedies with DRT

 

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