Amidst rising
non-performing loans, the Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest Act (SARFAESI Act) was the most potent
tool in the hands of banks for recovering bad loans.
The SARFAESI Act
empowers banks and financial institutions to recover their non-performing
assets without the intervention of courts.
The Act provides
three alternative methods for recovery of non-performing assets (NPA) -
securitisation, asset reconstruction and enforcement of security - without the
intervention of courts.
According to the
Reserve Bank of India's (RBI’s) Report on Trend and Progress of Banking in
India, 2012-13, banks have recovered Rs. 18,500 crore through the SARFAESI
route. Also, in terms of efficiency, the Act has proved to be more effective
than the debt recovery tribunals (DRTs) or / mediation by Lok Adalats.
Under the SARFAESI Act, notice is served and 2 months time is given to the borrower to
discharge his liabilities.
