A Scheduled Indian Bank advanced money to XYZ limited and the debt due to non-payment has been classified as 'Doubtful' by the Bank. The lender Bank intends to proceed against the debtor under SARFAESI Act, 2002. What ar

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act) regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. The provisions of the ordinance enabled banks and financial institutions to manage problems of liquidity, asset liability mismatches and improvement in recovery by exercising powers to take possession of securities, sell them and reduce non-performing assets by adopting measures for recovery or reconstruction. The SARFAESI Act, 2002 has empowered the Banks and Financial Institutions with vast power to enforce the securities charged to them. The Banks can now issue notices to the defaulters to pay up the dues if they fail to do so within 60 days of the date of the notice, the banks can take over the possession gussets like factory, land and building, plant and machinery etc. charged to them including the right to transfer by way of lease, assignment or sale and realize the secured assets. In case the borrower refuses peaceful hanging over of the secured assets, the bank can also file an application before the District Magistrate or Chief Metropolitan Magistrate for taking possession of assets. The Banks can also take over management of business of the borrower. The bank in addition can appoint any person to manage the secured assets the possession of which has been taken over by the bank. Banks can package and sell loans via "Securitisation" and the same can be traded in the market like bonds and shares. The other majors are: Securitization of financial assets and issue of security receipt Acquire financial assets by agreements, issuance of debentures or bonds. Redeem the security receipts given to the QIBs after their realization. Reconstruction of financial assets Subject of Varying RBI standards, take actions for proper management, a sale, a debt restructures, a settlement, or to take control. Enforcement of security interest Enforce the secured creditor's security interest without the need of court action. Other Functions Act as a recovery agent for financial Institutions (Fts) or bank, as the manager of the secured assets appointed by the lender, or as the receiver assigned by the court.