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
