Q. “(SARFAESI) Act” is often seen in news is related to which of the following?

[A] Wilful Defaulters

[B] Agricultural loans

[C] Self Help Group loans

[D] Foreign Exchange Reserves

Answer: A

Explanation: Government of India finally cracked down on the wilful defaulters by passing the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.

The Act gives far reaching powers to the banks/FIs concerning NPAs:

  1. Banks/FIs having 75 per cent of the dues owed by the borrower can collectively proceed on the following in the event of the account becoming NPA:
  • Issue notice of default to borrowers asking to clear dues within 60 days.
  • On the borrower’s failure to repay: (a) Take possession of security and/or (b) take over the management of the borrowing concern and/or (c) appoint a person to manage the concern.
  • If the case is already before the BIFR, the proceedings can be stalled if banks/FIs having 75 per cent share in the dues have taken any steps to recover the dues under the provisions of the ordinance.

The banks/FIs can also sell the security to a securitization or Asset Reconstruction Company (ARC), established under the provisions of the Ordinance.

Source: TMH Ramesh Singh