SARFAESI Act, 2002 (Securitization Act)
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 enables banks and financial institutions to recover secured debts without approaching civil courts.
When a borrower defaults and the account becomes an NPA (non-performing asset), the bank may issue a demand notice under Section 13(2) and take possession of the secured assets under Section 13(4).
The Act significantly speeds up recovery proceedings and reduces delays in debt recovery litigation.
Frequently Asked Questions
The SARFAESI Act 2002 is a law that lets banks and financial institutions recover unpaid loans without going to civil court. It gives banks a faster way to get their money back when a borrower stops paying.
A bank can use this Act once a loan account becomes an NPA, meaning the borrower has stopped making payments for a certain period. At that point, the bank can start recovery action under this law.
A Section 13(2) notice is a formal notice a bank sends to a borrower once their account becomes an NPA, asking them to repay the outstanding loan within a set time.
If the borrower doesn’t repay after the notice period, the bank can take possession of the secured property under Section 13(4), speeding up recovery instead of waiting for a lengthy court case.