[GK/Econ] SARFAESI Act

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002:

·       It allows banks and financial institutions to auction properties (residential and commercial) when borrowers fail to repay their loans.

·       It enables banks to reduce their non-performing assets by adopting measures for recovery or reconstruction.

·       It is effective only against secured loans where banks can enforce the underlying security.

·       It promotes the setting up of asset reconstruction companies (ARCs) and asset securitization companies (SCs) to deal with NPAs accumulated with the banks and financial institutions.