Professional Documents
Culture Documents
Sarfaesi Act
Sarfaesi Act
Presented by
B.Veera Bhadra Rao
Sravana Karthik ch
Sai Reddy
Introduction
The provisions of this Act are applicable only for NPA loans with
outstanding above Rs. 1.00 lac. NPA loan accounts where the
amount is less than 20% of the principal and interest are not
eligible to be dealt with under this Act.
Provisions of the SARFAESI Act
The Act has made provisions for registration and regulation of securitisation
companies or reconstruction companies by the RBI, facilitate securitisation of
financial assets of banks, empower SCs/ARCs to raise funds by issuing
security receipts to qualified institutional buyers (QIBs), empowering banks
and FIs to take possession of securities given for financial assistance and sell
or lease the same to take over management in the event of default.
The Act empowers the Bank:
To issue demand notice to the defaulting borrower and guarantor, calling upon them to
discharge their dues in full within 60 days from the date of the notice.
To give notice to any person who has acquired any of the secured assets from the
borrower to surrender the same to the Bank.
•To ask any debtor of the borrower to pay any sum due or becoming due to the borrower.
If the borrower fails to comply with the notice, the Bank may take recourse to one or
more of the following measures:
•Take possession of the security
•Sale or lease or assign the right over the security
•Manage the same or appoint any person to manage the same
Definations:
Securitisation
Asset Reconstruction
Enforcement of Security without the intervention of the Court
Securitisation
o The SC/ARC shall keep and maintain separate and distinct accounts in respect
of each such scheme for every financial asset acquired, out of investments
made by a QIB and ensure that realisations of such financial asset is held and
applied towards redemption of investments and payment of returns assured on
such investments under the relevant scheme.
Asset Reconstruction
The SCs/ARCs for the purpose of asset reconstruction should provide for any
one
or more of the following measures:
The proper management of the business of the borrower, by change in, or take
over of, the management of the business of the borrower.
The sale or lease of a part or whole of the business of the borrower.
Rescheduling of payment of debts payable by the borrower.
Settlement of dues payable by the borrower
Taking possession of secured assets in accordance with the provisions of this
Act.
A creditor can enforce his interest in a security under the provisions of Section
13 on default in repayment of installments -
a) without intervention of the court and
b) non-compliance with the notice of 60 days after the declaration of the loan
as a non-performing asset.
Risks in Securitisation:
Sovereign Risk:
In case of cross-border securitisation transactions where the assets and investors belong
to different countries, there is a risk to the investor in the form of non-payment or
imposition of additional taxes on the income repatriation.